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An agency designed to give councils access to cheap debt has revealed details of its first issuance, six years after it launched.
The UK Municipal Bonds Agency (UKMBA) has confirmed it is issuing its first bond with Lancashire County Council, aiming to raise £350m in a five-year deal.
Sir Merrick Cockell, UKMBA’s chairman, branded it an “incredibly significant moment for local government”.
The agency said it is also finalising details of a second issuance, which is expected to be a £250m, 10-year, fixed-rate bond involving “several” councils.
UKMBA was set up in 2014 as a public limited company. It is owned by 56 local authorities and the Local Government Association. It aims to issue bonds and borrow on the market to help councils fund capital projects, such as infrastructure and housing development.
However, it has been beset by delays as doubts emerged over the financial security around cash-strapped councils. In the most extreme example, Northamptonshire County Council required a bailout after effectively going bankrupt in 2018.
But UKMBA was given an opportunity last October when the government raised the Public Works Loan Board (PWLB) lending rate by one percentage point. The increase gave the UKMBA fresh impetus, with councils seeking alternative sources of borrowing.
Sir Merrick said Lancashire County Council had saved around £20m by borrowing through UKMBA instead of the PWLB. The council has an Aa3 credit rating with Moody’s, which UKMBA said meant it was not subject to its own credit process.
“In current circumstances, launching a first bond has been a major challenge,” Sir Merrick wrote on LinkedIn.
“Having successfully done so proves the concept, but also confirms the financial strength of Lancashire County Council and the sector.”
The agency was also boosted last year by appointing advisers PFM, which resulted in UKMBA changing its operating model.
Sir Merrick added: “UKMBA now looks ahead to our first multi-authority issue, preparations for which are already under way.”
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