County council set to become first local authority to obtain bond from UK Municipal Bonds Agency

The UK Municipal Bonds Agency (UKMBA) has unveiled plans to issue its first ever bond, a £250-300m 5-year SONIA linked Floating Rate Note (FRN) for Lancashire County Council.

The deal is subject to the local authority’s usual governance processes.

The Agency said the bond would not fall within its proportional guarantee either now or in the future; it will be guaranteed solely by Lancashire.

It added: “As the bond will be issued on behalf of a single council and will not be guaranteed by any other local authority, Lancashire has not been subject to the UKMBA’s own credit process because Lancashire County Council has an AA3 credit rating from Moody’s.

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“The issuance, which will be used to facilitate Lancashire’s capital funding agenda, will be the first bond to enter the market from the UKMBA and will serve as a ‘proof of concept’ for a wider pooled issuance, targeted for March/April 2020.”

This second issuance will be the UKMBA’s first proportionally guaranteed bond, expected to be a £250m 10-year fixed rate bond. The maturity term and date of issue are still to be agreed.

Sir Merrick Cockell, Chairman of the UKMBA, said: “This is an incredibly significant moment for local government. The launch of the very first UK municipal bond finally gives UK authorities the opportunity to take control of their own finances. Raising money through the Agency gives local authorities a flexible and simple route to access highly competitive, market-beating rates, under terms that suit their circumstances.

“Following the PWLB rate rise in 2019, which has priced a large number of councils out of the market, there is strong appetite from across the sector for access to the funding options the UKMBA offers.

“The UKMBA offers, flexible and highly competitive funding structures, underpinned by our robust credit process and revised guarantee structure that we believe is highly attractive to a broad range of investors.”

The UKMBA is owned by local councils and the Local Government Association.

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