Approval of municipal bond agency rules paves way for first issue

10 Jun 16

Nearly 20 local authorities are set to approve the UK Municipal Bonds Agency’s regulations by the end of July, clearing the way for its landmark first issue to take place in the autumn.

Cambridgeshire Photo: Alamy

Cambridgeshire County Council was the first authority to approve the UKMBA’s framework agreement. Photo: Alamy

 

The UKMBA, formed to issue municipal bonds that will raise funds that will then be lent to councils, told PF that nine authorities had so far approved its framework agreement to borrow. 

These are: Cambridgeshire County Council; Southampton City Council; City of York Council; Camden Council; West Lindsey District Council; South Norfolk District Council; Warrington Borough Council; Barnsley Metropolitan Borough Council; and Reading Borough Council.

At least 10 other councils are due to approve the agreement in June and July, while a number of others have indicated they will do so, but have not confirmed when this will be. 

The update comes after UKMBA chair Sir Merrick Cockell said that the first bond issue was set to take place this autumn.

Speaking at a conference in London on 24 May, Cockell said work was already under way to match local authority borrowing needs to money raised from the first issue.

“The LGA on behalf of the sector created the UKMBA for two main reasons,” Cockell said. “To develop cheaper sources of capital finance for local authorities by using the collective strength of local government itself, and as a clear signal to the wider world about UK local government’s ambitions and ability to find its own long-term solutions rather than being subservient to national government telling us what to do.”

Some authorities were concerned about being party to the joint and several guarantee that would operate if a local authority defaulted on borrowing, he acknowledged. 

No council in the country has ever reneged on a liability since the City of London was formed over 1,000 years ago, but the UKMBA needed to have processes in place should one do so. 

There would be a “full and thorough assessment process”, Cockell added.

“Not every council’s finances make them eligible to be part of a bond issue. Those that are involved in the bond issue can take comfort from the fact that they are working with first class, highly rated councils. It is a relatively light touch process but it is there.”

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