Liverpool

Long-term debt

PWLB loans:
£120,000,000

Other public sector loans:
£0

Private sector (LOBO loans):
£178,000,000

Bonds and securities:
£6,773,000

Total long-term borrowing:
£304,773,000

Source: DCLG Borrowing and Investment Live Tables Q2 2015-16

Liverpool's LOBO loans

Principal, £
Initial Counterparty
Existing counterparty
Date Signed
Drawdown date
Maturity date
Lender's option period (m)
Initial interest rate, %
Step up rate, %
Step up/1st option date
Rate change
Advisors
Brokers
Broker Fee, £
Notes
30,000,000Eurohypo24/01/200625/01/2066603.77026/01/2020NoSectorICAP72,000.00
10,000,000Eurohypo28/04/200628/04/2066604.87028/04/2018NoSectorN/A
10,000,000Bank of Scotland09/05/200609/05/2066604.87009/05/2018NoSectorN/A
15,000,000Barclays09/05/200609/05/2066604.87009/05/2018NoSectorN/A
25,000,000Dexia27/11/200627/11/2076603.78527/11/2018NoButlersTullett Prebon60,000.00
25,000,000Barclays26/03/200726/03/2077123.99004/04/2016NoButlersICAP60,000.00
30,000,000Bayerische Landesbank11/07/200712/07/2077124.30011/07/2016NoButlersTullett Prebon18,000.00
25,000,000Dresdner BankEurohypo08/05/200608/05/2066604.90009/05/2016NoSectorN/A


LOBO Loan contracts as PDFs

All contracts on Google Drive




Blog posts about this council

3 thoughts on “Liverpool Council Finance Director Becky Hellard – Incompetent, Misled or Corrupt..?

  1. Hi, I was at the meeting, filmed the video and made notes on what Becky Hellard said. Hopefully the below fills in some of the gaps from the 12:40 point. .

    “Errm, the Authority’s passed a favourable one which has just been highlighted there around that particular issue.

    Errm, and then on the LOBO one, the reason why that is is, it is you know really to be quite direct about it, the modification that you’ve got on page 75 is we remain confident that the agreements that were entered into in the previous financial years did represent good value for money.

    They were at lower rates than the PWLB err Loan Board offered at that time and we have got the ability to errm to leave them at any stage without any penalties.

    OK, so they you know, whilst this is all going on, I want to reassure Members that actually you know we’re, we are not err actually concerned about them as professionals, OK?”

    Members = Members of Liverpool City Council (coucillors)
    PWLB = Public Works Loans Board
    LOBO = Lender Option Borrower Option

    Page 75 refers to her report to the meeting which has this to state on the subject,

    “Grant Thornton, the City Council’s auditors, has received an objection with regard to the Council’s 2015⁄16 Statement of Accounts and this has prevented them from issuing an audit opinion at the time of reporting. The objection relates to certain types of loan arrangement which the City Council has entered into. In previous financial years the City Council has taken out a number of loans which are referred to as LOBOs (Lender Option Borrowing Option). A LOBO is a loan containing a Lenders Option and a Borrowers Option. It is for a fixed period but with options for the lender to change the rate of interest (upwards) periodically within the term (LO). If the lender exercises their option then the Borrower’s Option is to accept the revised rate of interest or to repay the loan (BO). It should be noted that not all LOBO loans are the same as LOBOs may have a fixed rate of interest or predetermined steps up, down or linked to some other reference rate. Liverpool’s LOBOs are all at fixed interest rates and with options for repayment should the lender seek to increase the rate. Liverpool City Council currently has a total of £170 million in LOBO loans taken out in 2006 and 2007 – interest rates range from 3.77% to 4.90%.

    The City Council, along with a number of other councils (including Manchester, Leeds, Newcastle, Wirral and 20 others) has received an objection to its accounts citing LOBOs as the cause for objection. The objection, which was made to the Council’s auditors Grant Thornton, seeks to have such loan arrangements overturned on the basis that no rational person would have entered into them. Grant Thornton are still to reply to the objection as they are awaiting guidance from the National Audit Office.

    Nevertheless, Council officers have considered the objection and are confident that the agreements entered into in previous financial years in fact represent good value for money as the interest rates were lower than equivalent PWLB loans of the period and any lender option to increase rates could be met by the City Council exiting the arrangement with no penalty. The City Council took out LOBOs as part of a treasury management strategy devised to maximise savings from the pending Housing Stock Transfer which took place on 1st April 2008. This strategy was to reduce PWLB borrowing to a level equivalent to the amount of HRA debt that was to be paid to the PWLB by the Government (DCLG). This resulted in the Council’s high rate PWLB loans (some over 10% interest payments) and equivalent costs (premiums) being paid off by the Government. The other effect was to reduce the Council’s average borrowing rates of interest thereby making savings on interest costs. The strategy was carried out and the benefits to the Council were the payment of £560.5 million principal and £174.5 million premiums by DCLG to PWLB and estimated interest savings of £40 million over the life of the loans.

    The outstanding objection will mean that until such time as the auditors have investigated the matter and have concluded that the agreements are vires, then they cannot issue the City Council with an audit opinion. When the matter has concluded satisfactorily then an opinion will be issued and this will be reported to Audit and Governance Committee at the appropriate time. ”

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