The London Borough of Sutton has priced its debut bond with a 35-year final maturity and a coupon of 1.732%.
London/Luxembourg - 3/11/2020. An initial £100m has been issued with £150m retained for future sale. Sutton will use the proceeds to refinance short term debt and finance projects within their approved capital programme.
The bonds (which will be listed on the International Securities Market of the London Stock Exchange) have a Moody’s rating of Aa3 (stable) in line with the UK Sovereign rating. The bonds were issued via the european primary placement facility (eppf) S.A. acting for its compartment London Borough of Sutton. eppf is an established, regulated Luxembourg limited liability company whose principal activities are the issue of securities via compartments within the limits of Luxembourg law. eppf is set up to provide borrowers including local authorities, corporates and governments with an innovative, simple and cost-efficient route to accessing the debt capital markets.
The transaction was arranged by Centrus who worked with eppf and Clifford Chance to design and deliver a financing structure which can be utilised by other local authority issuers. London Borough of Sutton was advised by Link Group’s Treasury Team. Centrus and Link Group have an existing partnership which provides debt capital markets solutions to Link Group clients. RBC was sole bookrunner.
Sutton launched their £100 million debut transaction on Monday morning with price guidance of Gilts + 100bps attracting a strong order book and allowing the Bookrunner to price the 2055 bond at a coupon of 1.732% (95bps over the Oct-50 Gilt). The bonds amortise from 2045 to 2055 translating to a 30-year weighted average life.
The Arranger and the Bookrunner were advised by Clifford Chance London, eppf by Simmons & Simmons Luxembourg and London Borough of Sutton was advised by Allen & Overy.
Quotes
Sutton
“We are really pleased with the outcome of this transaction that shows the strength of the London Borough of Sutton credit. We were looking for a long-term funding at the best rate possible which this option has clearly provided and locks in that value for the long-term.” Richard Simpson, Strategic Director of Resources (Section 151 Officer)
Centrus
“This transaction represents a breakthrough for local authorities seeking a simple, robust and low-cost route to accessing the debt capital markets. We are pleased to have worked with London Borough of Sutton in delivering such a successful financing outcome as well as arranging the first transaction in the GBP bond market through eppf, which applies innovation and technology to streamline the traditional bond issuance process.” Robert St John, Centrus Managing Director
RBC Capital Markets
“RBC Capital Markets is proud to have acted as Bookrunner on this important transaction, which demonstrates the confidence that bond investors have in the London Borough of Sutton. The timing of the transaction was opportune as long-term fixed rates of interest are at historically low levels.” Rob Lamb, Managing Director and Head of European Corporate Debt Capital Markets at RBC Capital Markets
eppf
“We at eppf are pleased to have worked with the London Borough of Sutton, Centrus, RBC, Clifford Chance and Link in the successful launch of the bond, the bond and compartment having been rated by Moody’s at Aa3 (stable). eppf provides a fast, cost efficient and straightforward route to accessing the capital markets by local authorities, corporates and governments. eppf has assisted in raising funds for entities both in Europe and the United Kingdom and will continue to do so in the same way after Brexit.” Robert Koller, CEO eppf
Link Group
“We are delighted to have advised the London Borough of Sutton on the successful issuance of its debut public bond financing, which has resulted in the Authority securing long-term conventional funding at the tightest spread (over the conventional UK Gov. Gilt) achieved by a UK local authority in the public market over the last couple of years, using a new low cost, efficient route to market. The transaction was oversubscribed which is testament to the Authority’s high credit quality and strong management team. The Authority has successfully demonstrated that it is possible for local authorities to secure cheaper General Fund borrowing from the institutional investor market, than that currently available from the PWLB.” David Whelan, Link Group Managing Director
Clifford Chance
Debt Capital Markets partner Paul Deakins commented: "We are delighted to have supported Centrus, eppf and RBC deliver an innovative and successful debut transaction for the London Borough of Sutton. The use of eppf shows how legal technology can help facilitate the issuance process and provide an efficient and cost-effective approach."
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