• Plymouth City Council and Santander UK secure interest rate swap agreement
• Provides Plymouth City Council with funding rate certainty, assisting with the financial costing, planning and maintenance of local services
• Arlingclose Ltd provided advice to the Council in facilitating the transaction
Plymouth City Council has secured an interest rate swap agreement with Santander UK locking into historically low interest rates, reducing the risk that future rate rises could impact on its capital expenditure plans.
It is the first time this financial instrument has been used by a local authority in almost 30 years, after the 2011 Localism Act granted a General Power of Competence to local authorities. This paves the way for the instrument to be reintroduced more widely for councils across England.
The trailblazing deal, facilitated by Santander UK and advised by Arlingclose Ltd, allows the council to convert a proportion of the council’s short dated variable rate loans into fixed loans, securing the overall cost of funding approximately 2% below the comparable rate available from the Public Works Loan Board at the date of the trade .
Andrew Hardingham, Service Director for Finance, Plymouth City Council, said: “Plymouth City Council is always looking at innovative solutions to provide value for money to our local taxpayers. Plymouth has embarked upon an ambitious capital investment programme and by securing low rates of interest on our borrowings will maximise the resources we have available and reduce the pressure on our revenue budget during these challenging times.”
Stuart Selby-Jerrold, Risk Solutions Group, Santander UK, said: “We are delighted to play our part in this landmark transaction for the local authority sector which supports Plymouth City Council with their funding strategy. Interest rate risk mitigation strategies are an especially relevant topic for our clients right now given the market volatility we have seen and the pressure on cash flows created by the pandemic.”
Mark Swallow, Strategic Director, Arlingclose, said: “This is a game changing moment in the world of local authority treasury management. Now local authority treasury managers can use the tools that have been available to their corporate counterparts to manage interest rate risk. We have been delighted to work with Plymouth City Council and Santander to facilitate this ground-breaking transaction.”
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Santander UK is a financial services provider in the UK that offers a wide range of personal and commercial financial products and services. At 30 June 2020, the bank had around 23,000 employees and serves around 14 million active customers, via a nationwide branch network, telephone, mobile and online banking. Santander UK is subject to the full supervision of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in the UK. Santander UK plc customers’ eligible deposits are protected by the Financial Services Compensation Scheme (FSCS) in the UK.
Banco Santander (SAN SM, STD US, BNC LN) is a leading retail and commercial bank, founded in 1857 and headquartered in Spain. It has a meaningful presence in 10 core markets in Europe and the Americas, and is one of the largest banks in the world by market capitalization. Its purpose is to help people and businesses prosper in a simple, personal and fair way. Santander is building a more responsible bank and has made a number of commitments to support this objective, including raising over €120 billion in green financing between 2019 and 2025, as well as financially empowering more than 10 million people over the same period. At the end of the first half of 2020, Banco Santander had more than a trillion euros in total funds, 146 million customers, of which 21.5 million are loyal and 40 million are digital, 11,800 branches and 194,000 employees.
About Arlingclose / arlingclose.com
Arlingclose Ltd has been providing treasury advice to local authorities since September 2004. focussed on providing our clients with an unbiased, bespoke service, encompassing all aspects of treasury management. Advisory services are focussed on three key areas; Debt Management, Investment Management, and Technical and Regulatory issues.
Arlingclose is authorised and regulated by the Financial Conduct Authority and based at our 35 Chiswell Street office in central London.