Referendum and elections delay bond agency launch
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Photo: European Parliament
Municipal Bond Agency bosses have blamed the Brexit referendum and local council elections for delaying the launch of its first bond until later this year.
Speaking to Room151, agency chairman Sir Merrick Cockell and chief executive Aidan Brady said they are now expecting a launch of a bond worth around £120m later this year.
Although eight councils have already adopted a framework agreement, allowing them to invest in the bond, the council purdah period is preventing a further tranche of at least eight authorities making progress until May or June.
Sir Merrick said: “We have got councils including Cambridgeshire, Southampton and Camden – a good mix – but we are now into the election period. Once the elections and the European Union referendum are out of the way, we should be able to make more progress.”
Brady said that the agency is now talking to the councils which have signed, or are about to sign, the framework agreement to gauge the appetite for a bond issue later this year.
“Once we are there, we will set out the terms sheets which will outline the rates at which councils will be able to borrow,” he said.
Brady also said the agency is examining the possibility of creating a specific product for housing investment, should councils demand it.
He said: “Traditionally, inflation linked bonds are suitable for housing and pension funds. If a number of councils want to do housing then we would look to structure an inflation-linked bond to satisfy their demand.”
Cockell also said that newly created combined authorities could provide a new market for the agency as they receive cash from central government.
He said: “They will be getting new money – around £30m each a year. If you have that for 30 years, that enables you to borrow quite a lot against it. We are probably a year away but we are set up to be able to help them with that.
Brady said that the agency was also overcoming regulatory issues which have so far prevented the launch of an online peer-to-peer lending platform for local authorities, which is under development.
He said: “As peer-to-peer lending is a regulated activity, putting structures in place that work has been the key challenge. But we think we have got the answer now.”
Sir Merrick said: “We know there is a lot of interest in this area and many councils are already doing it on the basis of personal contact between treasurers.
“We know from our sister agency in New Zealand that around 30% of their volumes are from peer-to-peer lending.”
