Jamie Griffiths

Dear Gateshead Metropolitan Borough Council,

1. How many Lender Option Borrower Option (LOBOs) contracts do you
have on your books?

2. When were they signed; and by whom?

3. With which financial institutions were they taken out?

4. Who advised the council to enter the LOBO(s)?

5. Since each Contract has been signed, has the lender exercised
their option and changed the interest rate?

6. If so, please specify the dates of the interest rate changes and
the revised interest rates.

7. Please provide a copy of the original, signed LOBO agreements.

Yours faithfully,

Jamie Griffiths

informationrights, Gateshead Metropolitan Borough Council

Dear Mr Griffiths

I refer to the request, which you have made under the Freedom of Information Act 2000 for records held by this service.

Acknowledgement

Your request was received by this department on 04 March 2015.

A final decision on your request would normally be sent to you within 20 working days of receipt of your request. This means that you can expect to receive your decision by 01 April 2015.

There are some limited situations under the Freedom of Information Act, which could mean that the period for a final decision may be longer than the normal 20 working days. If this occurs in your request, we will promptly advise you in writing.

Should our final decision not reach you on time, please feel free to call the contact officer named above to discuss any problems that may have arisen.

Yours sincerely
Information Rights Officer

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Gary Simpson (CS), Gateshead Metropolitan Borough Council

1 Attachment

 

My Ref: CC42489
Your Ref:
Date: 31/03/2015
Dear Mr Griffiths

Subject: Freedom of Information - Finance and ICT - Financial Services and
Training

I refer to the Freedom of Information Act 2000 and to your email/letter to
this service dated 4th March 2015 .

In accordance with the Freedom of Information Act, we have formally
decided to grant access to the records requested and accordingly they are
as follows and attached:

1. How many Lender Option Borrower Option (LOBOs) contracts do you have on
your books?
Answer: 12

2. When were they signed; and by whom?
Answer: See attached spreadsheet summary

3. With which financial institutions were they taken out?
Answer: See attached spreadsheet summary

4. Who advised the council to enter the LOBO(s)?
Answer: Advice was taken from the Council's appointed Treasury Management
Advisers (Sector, now Capita Asset Services) prior to each LOBO agreement.

5. Since each Contract has been signed, has the lender exercised their
option and changed the interest rate?
Answer: No

6. If so, please specify the dates of the interest rate changes and the
revised interest rates.
Answer: Not applicable

7. Please provide a copy of the original, signed LOBO agreements.
Answer: We cannot provide these as they are deemed as commercially
sensitive under Section 41 of the Act.

The information provided in response to your request is copyright
Gateshead Council unless otherwise endorsed. Granting access to this
information under the Freedom of Information Act does not permit you to
re-use the information provided for commercial purposes, for photocopying
or reproduction in any form. If you wish to re-use the information you
need to apply for a Licence. You can do this by writing to Tanya
Rossington, Information Rights Officer, Corporate Services and Governance,
1st Floor, Civic Centre, Regent Street, Gateshead, NE8 1HH. You may be
required to pay a fee or comply with conditions for permitted re-use.

Should you have any queries regarding the contents of this letter, please
contact informationrights on 191 433 3000.

Yours faithfully

Informationrights

 

 

 

Gary Simpson
Gateshead Council
Customer and Financial Services

Tel: 0191 433 4703
Ext :4703
[1]mailto:[email address]

 

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References

Visible links
1. mailto:[email address]

Jamie Griffiths

Dear Gateshead Metropolitan Borough Council,

Please pass this on to the person who conducts Freedom of Information reviews.

I am writing to request an internal review of Gateshead Metropolitan Borough Council's handling of my FOI request 'LOBO loans'.

I believe the public interest in disclosure of the LOBO contracts
outweighs the concern over breaching commerial confidentiality. The
duration of these contracts and their long term financial
implications for the authority, which are by no means apparent
without disclosure of the contracts, are of great interest to
taxpayers and should be made available for public scrutiny.

Please note that I have recieved FOI responses from several other
local authorities who have produced full details of their LOBO
contracts including interest rates, step-up dates, names of lenders
and the dates at which the contracts were signed. I have received
copies of LOBO contracts taken out with Barclays and RBS amongst
others.

A full history of my FOI request and all correspondence is available on the Internet at this address: https://www.whatdotheyknow.com/request/l...

Yours faithfully,

Jamie Griffiths

Carole Shaw, Gateshead Metropolitan Borough Council

1 Attachment

 

 

From: Tanya Rossington
Sent: 02 July 2015 13:39
To: Carole Shaw
Subject: review CC42489

 

 

Dear Mr Griffiths

 

I refer to your request for an internal review of the decision not to
provide you with copies of the original signed LOBO agreements.

 

I have reviewed the decision and uphold the decision to withhold the copy
agreements under Section 41 of the Act,’ Information provided in
confidence’, and Section 43 (2) of the Act ‘ Information is exempt
information if its disclosure would or would be likely to prejudice the
commercial interests of any person including the public authority holding
it.

 

Section 43(2) consists of two limbs which clarify the probability of the
prejudice arising from disclosure occurring. The Council considers that
“likely to prejudice” means that the possibility of prejudice should be
real and significant, and certainly more than hypothetical or remote.
“Would prejudice” places a much stronger evidential burden on the public
authority and must be at least more probable than not.

 In this case, the council considers that the prejudice “would be likely”
to occur, and that the impact of the prejudice would be substantial.

 

The information within each agreement is deemed to be commercially
sensitive because the loans have an active option in the banks favour that
would allow the bank to change the interest rate on a loan at each option
date. This option if taken would have a material financial consequence for
the bank and for the Council and so detailed financial information within
the contract will continue to be commercially sensitive until the loan
options have been exercised or the loans have matured.

 

 

Balance of the public interest

 

There is a public interest in openness and transparency on the part of the
council, and particularly in its accountability in relation to loans
agreements it enters into.

Public interest arguments in favour of withholding the requested
information

 

The council considers that the information that it has so far released,
which provides the number of agreements in place, the date they were
signed and which institution they are with, addresses the need for public
accountability.

 

However the release of the withheld information could harm the Council’s
ability to obtain best value for money.

 

Section 41(1) provides that information is exempt if it was obtained by
the public authority from any other person and disclosure would constitute
an actionable breach of confidence. This exemption is absolute and
therefore not subject to a public interest test.

 

The information has to have been obtained from another person. In this
matter the information was obtained from the banks we have agreements
with.

The information clearly constitutes information provided by a third party
to the Council and therefore the first limb of section 41 is met.

 

Would disclosure constitute an actionable breach of confidence? In
considering whether disclosure of information constitutes an actionable
breach of confidence the it is necessary to consider the following:

 

 Whether the information has the necessary quality of confidence;

 Whether the information was imparted in circumstances importing

an obligation of confidence; and

 Whether disclosure would be an unauthorised use of the information to
the detriment of the confider. The Council contends that the information
contained within the agreements is not trivial or otherwise accessible.

 

The Council finds that information will have the necessary quality of
confidence if it is not otherwise accessible, and if it is more than
trivial.

 

Lobo loans typically carry a cheaper initial rate of interest than new
debt available from other sources. They are structured with an initial
period in which a fixed rate of interest is paid , followed by a much
longer ‘variable’ period. During this  period at the agreed ‘call’ dates,
the lender has the option to increase the interest rate, the borrower has
the option to repay the debt. When general interest rates are rising the
interest the Council pays on it’s LOBO loans will usually increase but
still remain just below other available market rates. The higher rate
chosen by the lender is always likely to be below other immediately
available market rates so that at the decision points   when the borrower
has the option to repay, it will be likely to remain in a longer
relationship with the LOBO provider.

 

The Council considers that providing the full loan agreements is not in
the wider public interest. The public interest has been met by the Council
providing the information about the number of loans it has, who they are
with, the date signed and the fact that no lender has so far exercised
their right to change the interest rates. The Council believes it is in
the wider public interest that the Council can obtain the best value for
money for services and products. Revealing the requested information could
limit the Council’s ability to obtain best value for money. This could
lead to an increase in the Council’s future expenditure and would
therefore have a negative impact on the public purse.

 

Yours sincerely

 

 

Mike Barker,

Strategic Director, Corporate Services & Governance

 

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Carole Shaw, Gateshead Metropolitan Borough Council

Carole Shaw would like to recall the message, "review CC42489".

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Carole Shaw, Gateshead Metropolitan Borough Council

1 Attachment

 

 

Dear Mr Griffiths

 

I refer to your request for an internal review of the decision not to
provide you with copies of the original signed LOBO agreements.

 

I have reviewed the decision and uphold the decision to withhold the copy
agreements under Section 41 of the Act,’ Information provided in
confidence’, and Section 43 (2) of the Act ‘ Information is exempt
information if its disclosure would or would be likely to prejudice the
commercial interests of any person including the public authority holding
it.

 

Section 43(2) consists of two limbs which clarify the probability of the
prejudice arising from disclosure occurring. The Council considers that
“likely to prejudice” means that the possibility of prejudice should be
real and significant, and certainly more than hypothetical or remote.
“Would prejudice” places a much stronger evidential burden on the public
authority and must be at least more probable than not.

 In this case, the council considers that the prejudice “would be likely”
to occur, and that the impact of the prejudice would be substantial.

 

The information within each agreement is deemed to be commercially
sensitive because the loans have an active option in the banks favour that
would allow the bank to change the interest rate on a loan at each option
date. This option if taken would have a material financial consequence for
the bank and for the Council and so detailed financial information within
the contract will continue to be commercially sensitive until the loan
options have been exercised or the loans have matured.

 

 

Balance of the public interest

 

There is a public interest in openness and transparency on the part of the
council, and particularly in its accountability in relation to loans
agreements it enters into.

Public interest arguments in favour of withholding the requested
information

 

The council considers that the information that it has so far released,
which provides the number of agreements in place, the date they were
signed and which institution they are with, addresses the need for public
accountability.

 

However the release of the withheld information could harm the Council’s
ability to obtain best value for money.

 

Section 41(1) provides that information is exempt if it was obtained by
the public authority from any other person and disclosure would constitute
an actionable breach of confidence. This exemption is absolute and
therefore not subject to a public interest test.

 

The information has to have been obtained from another person. In this
matter the information was obtained from the banks we have agreements
with.

The information clearly constitutes information provided by a third party
to the Council and therefore the first limb of section 41 is met.

 

Would disclosure constitute an actionable breach of confidence? In
considering whether disclosure of information constitutes an actionable
breach of confidence the it is necessary to consider the following:

 

 Whether the information has the necessary quality of confidence;

 Whether the information was imparted in circumstances importing

an obligation of confidence; and

 Whether disclosure would be an unauthorised use of the information to
the detriment of the confider. The Council contends that the information
contained within the agreements is not trivial or otherwise accessible.

 

The Council finds that information will have the necessary quality of
confidence if it is not otherwise accessible, and if it is more than
trivial.

 

Lobo loans typically carry a cheaper initial rate of interest than new
debt available from other sources. They are structured with an initial
period in which a fixed rate of interest is paid , followed by a much
longer ‘variable’ period. During this  period at the agreed ‘call’ dates,
the lender has the option to increase the interest rate, the borrower has
the option to repay the debt. When general interest rates are rising the
interest the Council pays on it’s LOBO loans will usually increase but
still remain just below other available market rates. The higher rate
chosen by the lender is always likely to be below other immediately
available market rates so that at the decision points   when the borrower
has the option to repay, it will be likely to remain in a longer
relationship with the LOBO provider.

 

The Council considers that providing the full loan agreements is not in
the wider public interest. The public interest has been met by the Council
providing the information about the number of loans it has, who they are
with, the date signed and the fact that no lender has so far exercised
their right to change the interest rates. The Council believes it is in
the wider public interest that the Council can obtain the best value for
money for services and products. Revealing the requested information could
limit the Council’s ability to obtain best value for money. This could
lead to an increase in the Council’s future expenditure and would
therefore have a negative impact on the public purse.

 

Yours sincerely

 

 

Mike Barker,

Strategic Director, Corporate Services & Governance

 

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Jamie Griffiths left an annotation ()

Refer to ICO - no causal link established between disclosure and potential harm.