Treasury advice with regard to Leeds's LOBO Swaption / Embedded Derivative Loans

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Dear Leeds City Council,

For the LOBO contracts the council signed over the last twenty years please confirm which financial advisors advised the council on the cost / Benefit of each individual deal?

I am interested in understanding the process the council has undertaken to evaluate the cost/ benefit of entering lobo contracts versus borrowing from the Treasury / PWLB.

Which brokerage firms executed each of the trades?

What competitive process did the council undertake to select the above broker?

How much were Treasury Advisors paid on an annual retainer basis and how much was each advisor additionally paid for advice relating to each individual LOBO contract?

Yours faithfully,

Ranjan Kumaran

CCDPFOI, Leeds City Council

Dear Ranjan Kumaran,

 

Freedom of Information Request 13131: Details regarding LOBO contracts

 

I am writing regarding your request which I received on 28 October, 2014.
In your request you asked for the following information: 

 

For the LOBO contracts the council signed over the last twenty years
please confirm which financial advisors advised the council on the cost /
Benefit of each individual deal? I am interested in understanding the
process the council has undertaken to evaluate the cost/ benefit of
entering lobo contracts versus borrowing from the Treasury / PWLB.

 

Which brokerage firms executed each of the trades?

What competitive process did the council undertake to select the above
broker?

How much were Treasury Advisors paid on an annual retainer basis and how
much was each advisor additionally paid for advice relating to each
individual LOBO contract?

 

I will address each of your questions in turn.

For the LOBO contracts the council signed over the last twenty years
please confirm which financial advisors advised the council on the
cost/benefit of each individual deal?

Leeds City Council’s treasury management advisors are and have been Sector
(now Capita).  The Council determines its own funding position but
references intended decisions against advice from the Council’s treasury
advisors.  

 

I am interested in understanding the process the council has undertaken to
evaluate the cost/benefit of entering LOBO contracts versus borrowing from
the Treasury/PWLB.

Many factors affect a financing decision of which cost /benefit is only
part. Evaluation against PWLB is a starting point but overall fit with the
portfolio is also a consideration. Other factors include volatility of the
portfolio before and after a prospective trade, the outlook for interest
rates, overall forecast borrowing need including the need to re-finance
maturities, and the all-in costs of a trade including fees payable (fees
are also payable on  PWLB loans).

 

Which brokerage firms executed each of the trades?

The Council’s trades and has traded with all 6 broking firms in the Local
Authority treasury management market although one of these is not active
in the long term markets and provides  a short term market service.

 

What competitive process did the council undertake to select the above
broker?

Market conditions determine the timing and execution of any trade.  LOBO’s
were taken through all broking houses, which in many instances were the
only route to access these funds.  Trades were executed on the basis of
the best rate and structure for our needs at the time and reflected
movements in market rates over an extended period of time. Deal execution
was time sensitive and in each and every case, close monitoring of the
gilt markets would trigger financing activity.  Brokers are licensed by
the Financial Conduct Authority to act as intermediate arrangers of
finance for local authorities.  

 

How much were Treasury Advisors paid on an annual retainer basis and how
much was each advisor additionally paid for advice relating to each
individual LOBO contract?”

The treasury advice service provided covers more than just advice and
guidance on market loans and the annual fee for the total service is in
line with the Contract which has just been subject to a competitive tender
exercise. The exact amount is commercially sensitive. LOBO’s are arranged
through the Brokers and as such no fee is paid for the treasury advice
given outside of the annual fee.

 

Please note that the Council’s current Treasury Management strategy was
approved by the February 2014 meeting of Full Council. A copy of the
strategy is included in the agenda pack for that meeting, which is
published online in the Councillors and Democracy section of the Your
Council strand of the Council's website, [1]www.leeds.gov.uk.

I trust my reply serves to assist in your enquiry.  If you have any
queries about this letter, please feel free to contact me.

 

If you are unhappy with the service you have received in relation to your
request and wish to make a complaint or request a review of our decision,
you should write to:

 

Freepost RLZR-ELTX-RUEH

Leeds City Council

PO Box 657

LS1 9BS 

 

If you are not satisfied with the outcome of your complaint, you may apply
directly to the Information Commissioner’s Office (ICO) under Section 50
of the Freedom of Information Act for a decision.  Generally the ICO
cannot make a decision unless you have exhausted the complaints procedure
provided by Leeds City Council. 

 

The Information Commissioner can be contacted at: The Information
Commissioner’s Office Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9
5AF.

 

Yours sincerely

 

 

Saleem Aziz

Support & Development Officer

t: 0113 39 52734

e: cc[2][Leeds City Council request email]

e: cc[3][email address]

w: [4]www.leeds.gov.uk

 

Corporate Information Governance, Leeds City Council, Civic Hall,
Calverley Street, Leeds, LS1 1UR

 

“Information is everyone’s business and responsibility.”

 

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References

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