More than half the amount of capital funding required to get the UK’s first local government-owned bonds agency off the ground has been raised.
So far 38 councils, along with the LGA, have combined to invest more than £4.5m in the new municipal bonds agency that its backers claim could save local authorities more than £1bn in borrowing fees over the next three decades.
Currently, three-quarters of council borrowing is through the Public Works Loan Board and councils hope the new lending body, trading under the name Local Capital Finance Company (LCFC), will give borrowers more generous lending terms while offering investors a better rate of return than gilts.
Councils have until the end of the calendar year to invest in the agency as it seeks to raise between £8m and £10m in capital funding with the aim of issuing the first bond in April 2015.
Michael Lockwood, director of the LCFC, said: “There is a genuine sense of excitement about the progress made so far and the momentum is building up as we prepare for the agency’s official launch.
“The amount invested in the agency so far has exceeded the initial targets required to make it a feasible proposition. We’re now in the crucial final phase where we start the process of turning these ambitious plans into a reality.
“This company will be owned by local government and will have the single purpose of reducing councils’ long-term capital financing costs.”
An interim project team of capital market professionals has been appointed to launch the municipal bonds agency:
- Aidan Brady, a chartered accountant who has been the lead adviser to the LGA on the project, has been appointed as the interim managing director of the company
- Markus Krebsz, a risk specialist, is interim chief risk officer
- Tim Cavanagh, financial services professional, is interim chief operating officer
- Christian Wall, a local government finance policy officer, has been seconded to the company from Kensington & Chelsea RBC
The inaugural meeting of future shareholders in the agency will be held on 17 September.