S&P: maiden municipal bond should be issued this year

15 Feb 16

Credit rating agency Standard and Poor’s has said it expects the first issue from the Local Government Association-backed municipal bond agency to take place this year.

In an examination of council borrowing in the UK, the firm concluded that total local authority debt was likely to have hit £86.3bn by the end of 2015, up 1.2% from the previous year. This was mainly due to council borrowing from the Public Works Loan Board, as well as a £400m “green bond” issued by Transport for London and a Greater London Authority issue to fund the extension of the London Underground’s Northern Line.

S&P forecast total local authority debt would increase by 2% annually in both 2016 and 2017. Bond issuance by both the GLA and TfL was also set to increase, the report stated, while there is also likely to by limited issuance by other councils through the UK Municipal Bond Agency.

The agency has declared itself open for business after issuing its operating framework to councils. Once this is approved, UKMBA chair Sir Merrick Cockell, told Public Finance the firm would start to develop the plans for the first issue.

S&P stated that it now assumed the agency would issue its maiden bond in 2016 and also subsequently tap the capital markets in 2017.

“We note that for some local authorities – cities with directly elected mayors –additional revenues from fully devolved business rates could limit the need of external funding to cover capital expenditure in the future,” its review of European local and regional government borrowing concluded.

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