Warrington Borough Council issues £150 million 40-year CPI linked bond to fund its capital programme
Warrington Borough Council (the Council) today announced that it has issued £150 million of CPI-linked bonds. £50 million were sold by TradeRisks Ltd, who structured and arranged the issue, and £100 million were retained by the Council to provide access to future funding, if required. The bond is the first direct issuance by a English local authority in ten years and the first sterling issue linked to CPI with a cap and floor.
The Council is to use the bond proceeds to fund its capital programme. The proceeds will be spent on assets and infrastructure within the borough of Warrington, and the bulk is expected to be used on the Council’s £100 million new Town Centre development in Bridge Street Warrington.
The bond has a coupon of 0.846% which increases annually with CPI subject to a maximum increase of 3% per annum, providing valuable protection against future increases in inflation.
Councillor Russ Bowden (Portfolio Holder Corporate Services & Assignments) said: “This is a great example of the public and private sectors coming together and delivering an innovative solution to bear down on borrowing costs. I hope this is a model local government can develop. The bond structure has enabled us to save on our borrowing costs, diversify our borrowing portfolio and promote the new commercial ethos that the Council operates under’’.
Ben Fry, Managing Director at TradeRisks, commented: “This is a ground breaking transaction which is significant for both the Local Authority funding market and the inflation-linked bond market. TradeRisks, and the Council’s brokers, RP Martin, worked with the Council to develop a capital markets funding approach for Local Authorities which is attractive to bond investors in the current environment. This capital markets funding approach allows Local Authorities to diversify their funding sources as well as to generate savings over PWLB. The borrowing structure is tailored to take into account the Council’s long-term budget projections and revenue profile, and incorporates a cap on future debt payments. The use of public bond documentation enabled a competitive placement process and also allowed for the incorporation of retained bonds which provide the Council with funding flexibility in the future.”
TradeRisks Limited acted as sole arranger and dealer for the bond issue and was advised by Morgan Lewis LLP. The Council’s legal advisers were DWF LLP.