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Transcript of Business Weekly Advert
Suffolk brewer and pub retailer Greene Kinghas entered into a new, five-year £400mrevolving credit facility with its bankingpartners.
This replaces an existing £400m facility,which was due to expire in April 2012, andthe full £400m is available for five-years.
Compared to the existing facility, whichwas arranged at the attractive marginsavailable in early 2007, and based on current
drawings, the new facility will increase thegroup’s annual interest costs by circa £2.5mand will give the group an expected blendedaverage interest rate of around 6.1 per cent.
But Greene King says the new facilitygives it continued financial flexibility andhelps underpin the ongoing delivery of itsretail expansion and overall growth strategy.
Greene King recently announced strongtrading for the 38 weeks to January 23.
It reported that all businesses continuedto trade well with similar or slightly strongergrowth trends than those reported at theinterim results.
The board said it remained confident thatthe company would “continue to deliverprofitable growth over the rest of thefinancial year.”
BUSINESSWEEKLY March 31-April 7, 2011
NEWS www.businessweekly.co.uk
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Autonomy Corporation has entered intoagreements for the use of its ‘promote’technologies with a global computerhardware, software and servicesprovider. The agreements are valued inexcess of $9 million.
The Government’s Decentralisation andLocalism Bill could see local authoritiesapproach the bond markets to raise more than£13 billion by April next year.
The Bill, unveiled in December, laid out far-reaching proposals designed to emancipatecouncils from the constraints of centralgovernment by shifting power back to them andthe communities they serve.
One of the legislative changes to beintroduced is self-financing and the abolition ofthe Housing Revenue Account subsidy system.This means better off local authority landlordswill no longer receive subsidies from a centralGovernment pot, but will be required to supportlocal authority housing stock from their ownrental incomes.
These authorities will also be required tobuy-out their subsidy by April next year. In somecases this could cost up to £400 million.
There are approximately 136 localauthorities up and down the country which willfind themselves with repayments to make nextspring. Of these, 47 will be facing repayments of£100 million plus with several facing bills inexcess of £300 million. Conservatively, the totalfigure of debt to be repaid by local authorities islikely to exceed £13 billion.
Peter Abel, corporate director, BarclaysCorporate Eastern said: “There is no doubt thatmany local authorities will be looking closely attheir options in terms of meeting these large onetime payments to HM Treasury. With thepressures on their finances increasing, we couldnow see a return to the bond market activity lastseen in mid-90s.”
Local authorities have three broad optionsin relation to funding this payment. They canuse current cash balances, borrow from theGovernment in the form of the Public WorksLoan Board (PWLB), or approach externalinvestors via the bond market – either on theirown or potentially in combination with otherauthorities in similar positions.
The PWLB lent more than £50 billion lastyear for capital projects and as a lender of lastresort would appear to be the most obviousoption for local authorities with a large paymentto make.
However, as part of the coalition’s spendingreview last year, the cost of using this part of theGovernment balance sheet has dramaticallyincreased to one per cent more than theGovernment’s cost of borrowing, making it fivetimes more expensive.
Approaching the bond markets for capitaltherefore looks like a very credible alternative.For many local authorities, this would be thefirst time they would be taking on large amountsof external debt and the implications, costs andbenefits will need to be carefully considered.However, the strong credit profile of the broadlocal authority sector, together with current
investor appetite for bonds, means that localauthorities are expected to be able to issue long-term debt at a lower cost than the newlyincreased PWLB rate. Accessing the capitalmarkets would therefore diversify the localauthorities’ funding base away from the PWLB.
Abel added: “Local Authorities will haveplenty to consider before heading into the bondmarkets. The timing of any fundraising,appropriate size, target investors, potential costof carry issues and the pros and cons ofapproaching the credit rating agencies will all beon the immediate agenda. At the appropriatetime, the all important debate around the pricefor any bond will come more sharply into focus.
“No doubt there will be some healthycompetition between Local Authority borrowersas to who can achieve the cheapest cost offunding, but in accessing the capital markets,local authorities will be diversifying theirfunding base - a move that should be applaudedin the current environment.”
• Examples of LAs affected and theirprojected self financing settlement payment inmillions are as follows: Cambridge £219.6m;Ipswich £101.6m; Mid Suffolk £57.5m; Norwich£144.4m; South Cambridge £205.6m.
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New five year £400m creditfacility for Greene King
Eastern councils amongLA’s forced to seek £13bnfrom bond markets
Peter Abel, corporate director, BarclaysCorporate Eastern