A local government-backed agency aims to issue the first of a new kind of municipal bond – or ‘munibond’ – before Christmas, allowing councils to borrow more cheaply to pay for transport and other infrastructure projects.
The Financial Times (FT), citing ‘people close to the project’, reported that the UK Municipal Bonds Agency (UKMBA) is expected to issue its first bond – for £100m – before Christmas. It said bonds will be issued with maturities of between 10 and 20 years.
A spokesperson for the UKMBA told Transport Network that it is aiming to issue a bond before Christmas but said the size of the bond would depend on the number of councils that want to borrow from it, some of which are in the process of giving final approval.
The spokesperson added that, as well as planning larger issuances next year, the UKMBA is in discussions with the European Investment Bank (EIB) and others on plans to facilitated third party funding.
UKMBA Plc is a public limited company, owned by local councils and the Local Government Association (LGA). It aims to helps local councils to finance their investment in projects including infrastructure and housing, more cheaply than through other borrowing routes, such as Public Works Loan Board (PWLB), by issuing bonds, arranging lending between councils, and negotiating better borrowing rates from financial institutions.
At present the majority of local authority borrowing comes from the PWLB. The UKMBA spokesperson said that by borrowing from it, councils would be able to fund transport schemes and other infrastructure projects at a lower rate than by borrowing through the PWLB.
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