Newham Council could save £94m in loan restructure plans

PUBLISHED: 07:00 20 February 2017

Newham Council is set to save money by restructuring their loans (Picture: Dominic Lipinski/PA)

Newham Council is set to save money by restructuring their loans (Picture: Dominic Lipinski/PA)

PA Wire/PA Images

Newham Council could save up to £94 million after cabinet members agreed a restructure of its loans.

The decision allows the council’s director of financial sustainability to strike a new deal with a high street bank.

This will allow the council to switch their structured loans, also known as lender option borrower option or lobo loans, into normal fixed rate loans.

It would take away the ability for the bank to change the interest rate levels at regular intervals over the remaining lifetime of the loans - believed to be around 60 years.

The new agreement would save the council up to £1.6m on interest payments per year.

Cllr Lester Hudson, cabinet member for finance, oneSource and commercial opportunities, said: “We took out these types of lobos as they represented the best deal for the council at the time and have saved us millions of pounds in interest payments.

“They were part of our balanced and award winning strategy which includes a balanced approach to risk.

“As a council, and in line with good stewardship, we are always working to reduce the cost of our borrowing.

“We have taken independent legal and financial advice on this agreement and it is now the right time for us to restructure these loans.”

The council borrows money for infrastructure projects such as improving roads and building schools. Government regulations mean long term loans cannot be used to run services.

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