Aberdeen City Council launches bonds worth £370m
Aberdeen City Council has become the first Scottish local authority to raise money from the capital markets
Union Street, Aberdeen - Image credit: michimaya via Flickr
Aberdeen City Council has become the first council to raise money from the capital markets as it launched index-linked bonds worth a total of £370m today.
The bond is the first of its kind offered by a Scottish local authority and follows Aberdeen becoming the first council in Scotland to be given a credit rating.
Last month credit ratings agency Moody’s awarded the council an Aa2 credit rating, one below the UK as a whole.
Index-linked bonds are a type of debt. They allow the issuer to borrow money from investors through the financial markets, with interest payments linked to inflation and the capital amount repayable at a set maturity date.
In its report, Moody's noted that the council “has demonstrated a solid financial record for the last five years maintaining a net surplus against budget for the last five years with previous forecasts on expected outturns being realistic”.
The strong rating also took into account that the risk was lowered, because it was likely the council would be bailed out by the UK Government should it ever run into serious financial problems.
The proceeds from the bond issue will be used to fund the council’s infrastructure development programme, which includes school and housing developments, roads construction and the construction of a new Aberdeen Exhibition and Conference Centre.
The Aberdeen City Council leader Jenny Laing said: "This is a remarkable achievement by this council in securing this investment in the future of our city.
“Having already secured a credit rating from Moody's Investors Service at Aa2, the issue of the bond sees another step forward by the council in delivering a stable and fiscally prudent financial strategy that is both affordable and sustainable for the future as demonstrated by investor confidence.
"To continue to compete on an international stage, it is vital that we deliver world class facilities for Aberdeen's citizens, businesses and visitors. Today's announcement is a major boost towards that objective."
Finance, Policy and Resources Committee convener Councillor Willie Young said: "The bond issue is part of our strategy to maintain a diversified funding portfolio that provides us with greater financial flexibility.
“This flexibility will help Aberdeen anchor its status as both a global energy hub as well as ensuring that we have the infrastructure required to attract world class businesses as we seek to broaden and diversify our economic base."
The bonds will be listed on the London Stock Exchange and have a maturity date of 2054.
Child poverty set to increase by eight per cent in Scotland over next three years, predicts the Equality and Human Rights Commission
The Scottish Government is calling on the UK Government to match its 10-year funding offer
The committee also recommended that the Scottish Government look at Ireland as a model for reform of the business support service
The Infrastructure Commission for Scotland will advise the Scottish Government on its infrastructure strategy and investment
Vodafone today announced the commencement of trials of the world’s first air traffic control drone tracking and safety technology.