Former editor of Al Quds Al Arabi and current editor of Rai Al Youm Abdel Bari Atwan joins us (E692)
News on the Integrity Initiative, Twitter censorship of Electronic Intifada, and sanctions possibly affecting Iranian efforts against drug trafficking. Joel Benjamin discusses LOBO loans and how they have pressured local governments and public services. Former Premier League player Kevin George discusses the unseen mental health crisis in football, and finally, Sheffield poet laureate Otis Mensah performs ‘Float’ and discusses the need for a new kind of politics.
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Available here: We prepaid 3 LOBO loans that we had with RBS on October 1:
£10mn loan @ 3.95% interest which would have lapsed 30/1/69
£25mn loan @ 3.83% interest which would have lapsed 10/8/58
£25mn loan @ 3.83% interest which would have lapsed 10/8/57
In total, we paid a premium of £13,394,094 for the early prepayment which released KCC and the bank from all rights and obligations in regard to the three loans. We can account for this premium over the lifetime of the original loans. We refinanced the debt by a combination of additional 15-year loan and short-term borrowing. These were both at lower interest cost giving the council the benefit of net saving on interest costs (after allowing the additional cost of the premium and fees) and allows the council to manage our debt portfolio more flexibly as we have fewer long-term loans.
And here’s a follow-up answer:
We refinanced £40mn with a 15-year PWLB loan and the balance we will manage as part of our overall daily cash management (generally from cash surpluses but, where necessary, short-term borrowing). This offered a reasonable combination of balancing financial rewards and risks.
The rationale was explained in a statement to a different journalist before we made the decision to repay the LOBOs:KCC explained that it was exploring the possibility because some banks are looking to reduce their LOBO portfolios following changes in the accounting requirements. They may therefore be willing to negotiate reasonable repayment terms or they may seek to sell the portfolio to a third party.KCC is concerned that if the banks do sell there is a risk that the new purchaser might not exercise the ‘Lender Option’ and KCC would then be tied into very long debt.The statement said: “If we were able to prepay, it would enable us to manage our debt more flexibly and reduce long-term financing risk.“If the prepayment terms are sufficiently favorable we would explore options to refinance the debt at a lower interest cost which would result in a net revenue saving.”Prepaying existing loans would incur a premium and this is part of the negotiations. “We are only likely to proceed if the saving from the difference between current financing and alternative refinancing is greater than this premium, creating a net saving on the council’s budget.”