Fix Now, Loan Later Henry Johnston

Arlingclose is constantly striving to evolve its services, enabling clients to manage the risks and rewards that prevail in financial markets. In recent years, Arlingclose has worked hard to achieve savings for clients through multiple different avenues, helping to preserve much needed income. This could be through reducing fund manager fees for Arlingclose clients, helping to repay LOBO loans, or advising on interest rate swaps to name just a few.

Another way in which notable savings have been achieved is through forward starting loans with private lenders. Forward starting loans are, as the name suggests, loans agreed in advance for delivery on a pre-determined future date at a fixed rate. Advantages include providing a high degree of long-term certainty on interest cost while allowing beneficial exposure to low cost short-term interest rates, therefore hedging against future interest rate rises over the longer-term. One notable risk is that if interest rates fall contrary to expectations then the authority must purchase the forward loan at the previously stated conditions when the contract was decided. However, the same is true of any fixed rate loan.

Keeping this in mind, forward loans can be extremely useful if interest rate rates are expected to rise in the long term. Bank Rate is likely to move in the future, whether we are looking 1, 5 or 20 years into the future, due to the ever-changing economic picture. A forward loan allows for a blended portfolio of initial low cost, short-term rates followed by the fixed long-term rate can offer a more affordable structure compared to a loan from the PWLB.

Reviewing Performance – A Case Study

In 2018, Arlingclose advised on the arrangement of two forward starting loans between a private sector lender and a district council. These loans were arranged for drawdown in 2021 and 2022. By agreeing forward starting loans a number of years in advance, this allowed the particular authority to fix in the long-term rate while still retaining the benefit of low rates over the short to medium-term. There was a long-term certainty of cost in the later years on £50m worth of debt.

How much did this help to save? Compared to fixing out with the PWLB at that time this approach has helped to save £3.5m in interest payments, with minimal risk.

Arlingclose is always on hand to help clients achieve real savings and can do this through advising on, negotiating and arranging loans such as the one mentioned above.

Arlingclose will not just act in an execution capacity but will look to take a holistic approach and offer our expertise on the technical analysis too.  Following this, Arlingclose can introduce our panel of lenders and assist with the best approach going forward, including in-depth analysis, due diligence and a documented audit trail. We can further advise on your local authority’s credit strength and and expected loan margins.

Arlingclose can also help with negotiating terms and the legal documentation as well as validating loan pricing at execution. Finally, post trade accounting support can be provided. If you would like to get in touch with us to discuss our wide array of debt or investment solutions and see the savings that your authority could make, then please contact

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