Newham declines FOI request for LOBO replacement loan rate
0
A London council has refused to reveal the rate it is paying on £248.5m of fixed rate borrowing which it has converted from Lender Option Borrower Option (LOBO) loans.
Councillors at London Borough of Newham made a freedom of information request following the council’s announcement in February that it had renegotiated the terms of the LOBOs.
The council said that it has saved £94m on interest rates which would otherwise have been payable on the loans. But it has rejected a call for clarity on the new fixed rate it will pay.
In its response to the FOI request, the council said: “The information requested relates to the specific rate of interest which was negotiated in securing this new financial arrangement.
Sign up for Room151 Job Alerts
“Having consulted with the relevant financial institution we consider that in disclosing the fixed interest rate agreed, would be likely to weaken Newham’s bargaining position during future financial and contractual negotiations.
“This could potentially affect the council’s income and budget and essentially, the availability of financial resources for residents and in the delivery of Newham’s services.”
Barclays’ bargaining power on similar or related restructuring processes could also be weakened, the council said.
Newham recognised the public interest in promoting transparency, but said that maintaining the exemption outweighed the public interest in disclosure.
Councillor John Whitworth, which helped submit the FOI request, told Room151: “The executive is being secretive, as it is in all things. It is very difficult for backbench councillors to get information.”
However, he said that disgruntled councillors will continue the fight for information on the financial arrangements relating to the renegotiated LOBOs.
The FOI revealed that the councils were advised by treasury advisers Sector and Butlers on its LOBO loans portfolio.
It also said that Allen & Overy had provided legal advice while JC Rathbone & Associates and Ernst & Young had provided independent financial advice on the deal.
No fees were paid to brokers carrying out the LOBO deals, according to the council’s response.
Nick Dunbar, founder and editor of the Risky Finance website, was sceptical about the latest deal. He said: “Given that most of Newham’s Barclays LOBOs were of the highly complex ‘range LOBO’ variety with rates currently as high as 7.6%, it might have been a more fruitful strategy for the council to have disputed the entire break cost on the grounds that the products were mis-sold.
“Instead, the council has seemingly absolved Barclays of legal risk while committing to paying crippling interest rates for 50 years or more.”
