Suffolk County Council (SCC) has successfully arranged the refinancing of £30m of LOBO debt. Loans with an average cost of 3.91% and an average life of 44 years were prematurely repaid, following negotiations with the existing lender to agree suitable prepayment terms.
The transaction, concluded in August 2021, involved refinancing debt with new loans from the Public Works Loan Board. Replacement loans were borrowed at an average rate of 1.48% over 20 years with an equal instalment of principal repayment profile.
Arlingclose produced analysis for the Council outlining the LOBO debt prepayment, including the risks and rewards of the various restructuring options available in different interest rate scenarios. Arlingclose also helped SCC through the execution process and advised on drawing down the new loans. Cumulative savings over the next 44 years are projected to be £6.4m. The removal of the lender’s options provides certainty of cost for SCC, reducing future refinancing and interest rate risk.
An added benefit was the ability to shorten the repayment profile of debt, sculpting loan maturities to match the Council’s projected underlying borrowing requirement (liability benchmark).
David Blake, Director at Arlingclose said “this refinancing package enabled SCC to take advantage of current market conditions and interest rates to de-risk the debt portfolio, creating significant savings in the process. It continues the process of local authority LOBO exit strategies we have set in train”.
Suffolk’s Chief Financial Officer commented “This refinancing package has enable us to make savings in future interest payments, allowing the Council to invest more in its capital programme. Arlingclose support ensured that the process to complete the transaction proceeded smoothly”.