Municipal Bonds Agency expected to issue first bonds in April 2015

More than £4.5m has been contributed by 38 councils to get the Municipal Bonds Agency launched, the Local Government Association has said.

It has appointed an interim project team of capital market professionals to support the launch. The agency will trade under the name Local Capital Finance Company and is expected to issue its first bonds in April 2015.

The agency is intended to give local authorities an alternative source of lending to the Public Works Loans Board (PWLB) and to drive down borrowing costs by competing with it.

A business case issued earlier this year indicated that councils could save more than £1bn in all by borrowing from new agency for infrastructure projects, rather than from conventional sources.

The saving arises because councils currently source 75% of borrowing from the PWLB, and if half the outstanding debt were transferred to the agency the saving could be £1.2-£1.45bn over 30 years, the LGA said.

Raising £4.5m raised puts the LGA more than halfway towards its fundraising target.

Former LGA chair Sir Merrick Cockell told its conference in July that it aimed to raise between £8-10m by the end of the 2014 for the agency, but its launch was not dependent that being reached.

Local authorities would continue to invest in the agency throughout the rest of this year to complete the raising of capital, the LGA said.

LGA executive director Michael Lockwood said: “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 is a great opportunity for councils and other pension funds to make significant savings by directly raising the money we need for new roads, housing and infrastructure.”