The LGA and more than 50 local authorities have worked hard to develop the idea of an alternative borrowing agency to the Public Works Loan Board (PWLB). That vision has been turned into a reality and the United Kingdom Municipal Bonds Agency is ready to issue its first bond.
So, what will the bond agency be able to offer?
The initial bond available will be a short-length bond for 10 to 15 years at a rate competitive with the PWLB. The minimum loan for an individual council will be £1 million.
The intention is to go to the market early in 2019 but, in order to do this, firm expressions of interest from councils will be needed within the next few months.
To take advantage, councils will also need to formally accept the Agency’s framework agreement. This is something that has already been done by 23 councils and can form part of the annual treasury management strategy and policy process that councils go through as part of the annual budget-setting process.
This is an essential requirement of the bond-issuing process and we have created a template report to help make the process as easy as possible for interested councils.
“Lastly, councils who borrow will be helping to ensure that local government is as resilient as possible in the future
But why should a council borrow from the Bonds Agency instead of the PWLB?
First, the Agency will aim to beat the PWLB on price. So, in times of ongoing funding pressures facing all councils, every penny counts to protect vital local services.
Second, it will be as secure as it can be. The Agency will carry out due diligence on all potential borrowers and the results of this will be shared with your finance director. The bond will be covered by a joint and several guarantee from borrowing councils.
Lastly, councils who borrow will be helping to ensure that local government is as resilient as possible in the future.
The UK Municipal Bonds Agency was created by local government, so we could secure our own source of borrowing. We’re now ready to issue our first bond and, as one of the councils that signed up to borrow, I would encourage others to join us to make the first transaction a success.
This is really a one-off opportunity for local government to help itself and help each other.
It is a win-win if you borrow from the Agency. The borrower gets a cheaper rate and the alternative to the PWLB is
LGA Chairman Lord Porter said:
“We know that councils in England are borrowing between £400 million and £700 million a month.
“If they can capture just a segment of this borrowing they can make a success of a first issue and gear up the bonds agency to be a low-cost alternative to the Public Works Loans Board, helping councils to raise funds to help support their local areas.”