Councils pledge almost £3m to bond agency

The nascent municipal bonds agency could start recruiting staff as early as next week after it was revealed that councils have already pledged almost £3m of capital.
This week, outgoing Local Government Association chairman Sir Merrick Cockell said that not only had an initial £400,000 in start-up costs been met, but the agency was almost all the way to raising the £3.5m needed for the vehicle to break even.
He said: “We have not only reached our July fundraising target, we are on course to hugely beat it. At the close of business yesterday, we had known council commitments worth £2.9m…”
The pledges, he said, have been made by 22 councils, “large and small, districts, counties, cities and London boroughs, of all political colours and from both north and south of the country”.
Some councils have committed to staged payments, with a proportion to be held back until a final review of the project towards the end of the mobilisation stage. This means that not all of the total outlined by Sir Merrick is directly relevant to the set-up stage.
The revised business plan for the bond agency, released in April, said that break even would be reached at between £3.5m and £4m, although it is attempting to raise £8m to £10m in total to provide a contingency buffer.
The LGA’s executive will meet next week to decide whether to progress with its plans for the agency, which was formally established on 3 June under the name the Local Capital Finance Company Ltd.
The meeting will vote on committing the LGA to providing £500,000 towards the costs of running the agency up until the point of its first bond issue, planned for next April or May.
Being held next Thursday afternoon, the meeting will be given updated figures compiled just hours earlier.
Councils have been given a deadline of 17 July to signal their formal pledges. Because a number of councils have still to go through the full approval procedure, the LGA is accepting a non-legally binding letter of intent outlining the amount they are likely to contribute.
Local authorities will have until September to sign a subscription agreement and handover their money to the agency.
Seperately, the LGA has agreed a series of amendments to the LGA constitution intended to allow the association to adopt a more commercial approach, particularly in relation to the creation of the agency.
A new clause formally gives the LGA the power to “subscribe to, take, purchase or otherwise acquire, hold, sell, deal with and dispose of, place and underwrite shares, stock, bonds, debentures, debenture stocks, obligations or securities, and to establish and participate in corporate vehicles constituted or carrying on business in England and Wales”.