What is the current situation?

Fife Council has 23 LOBO loans totalling £327.35 million, including loans that have had their option removed by the bank.

Fife Council is 6th out of 210 in the ranking of councils with the most LOBO debt.

Since we began monitoring in 2015, this is what happened.
LOBO loans in 2015 £347.35 million
Term ended 0
Exited £20 million
Option removed £50 million
Remaining total £327.35 million

How big is the problem?

Fife is currently paying £14.88 million in interest per year.

It is projected to spend at least £656.29 million in interest payments over the remaining term of the loans, the last one ending in 30/03/2077.

The interest rates for Fife Council’s LOBO loans are between 3.950% and 11.800%. Currently, councils can borrow from central government (via the Public Works Loans Board) at much lower rates (between 1% and 2.5%) and on much more favourable terms. To illustrate, on a loan of £10m over a 50 year term, at 4% a council will pay £20m in interest while at 2% they will pay £10m.

Banks can sell their loans to other lenders. The selling price of a loan varies constantly based on the embedded derivatives and on the likelihood of the loan and interest being paid in full. We’ve rated the loans based on their most recent market valuation, also called fair value. A loan with a high rating will be considered valuable by the lenders and therefore might have a higher exit penalty compared to a loan with a lower rating.  However, if the Council were able to negotiate a good exit deal, it could potentially save more on a high-rated loan than on a lower-rated one.

Below is an outline of Fife Council’s LOBO loans at the end of the 2020/21 financial year.

A few notes on the data:

  • Annual interest is a result of an approximate calculation (interest rate*principal), not the exact amount paid by the Council which might vary slightly per year
  • Remaining interest indicates the total interest owed until the term of the loan ends. This is also an approximate calculation (annual interest*remaining term) and must be considered as a minimum as it does not take into account the case in which the bank uses its option to raise the interest rate.
  • Rating is determined by the formula [fair value/(principal+remaining interest)]. High corresponds to results above 0.7, low to results below 0.6 and average between 0.6 and 0.7. Please note that the fair value of a loan is related to a specific moment in time and changes constantly. The rating here is based on the most recent fair value provided to us, which is usually calculated at the end of the last financial year.

Current loans

Bank Principal Status Remaining term Current interest rate Annual interest Remaining interest Rating
Barclays £25,000,000 Option removed 56 years 4.250% £1,062,500 £59,500,000 Low
Barclays £25,000,000 Option removed 55 years 4.290% £1,072,500 £58,987,500 Low
Bayerische LB £45,400,000 Active 46 years 3.950% £1,793,300 £82,491,800 Low
Bayerische LB £2,700,000 Active 10 years 4.650% £125,550 £1,255,500 High
Commerzbank £43,400,000 Active 43 years 4.375% £1,898,750 £81,646,250 Low
Commerzbank £25,000,000 Active 45 years 4.875% £1,218,750 £54,843,750 Low
Commerzbank £20,000,000 Active 45 years 4.875% £975,000 £43,875,000 Low
Commerzbank £10,000,000 Active 44 years 5.300% £530,000 £23,320,000 Low
Commerzbank £8,400,000 Active 45 years 4.500% £378,000 £17,010,000 Low
Commerzbank £8,100,000 Active 21 years 4.580% £370,980 £7,790,580 High
Commerzbank £7,500,000 Active 44 years 4.500% £337,500 £14,850,000 Low
Commerzbank £6,000,000 Active 41 years 4.750% £285,000 £11,685,000 Low
Commerzbank £6,000,000 Active 41 years 4.750% £285,000 £11,685,000 Low
Commerzbank £4,800,000 Active 41 years 4.650% £223,200 £9,151,200 Low
Commerzbank £1,000,000 Active 21 years 6.400% £64,000 £1,344,000 High
Commerzbank £1,000,000 Active 2 years 11.800% £118,000 £236,000 High
Dexia £18,440,000 Active 44 years 5.080% £936,752 £41,217,088 Low
Dexia £15,000,000 Active 44 years 4.680% £702,000 £30,888,000 Low
Dexia £9,310,000 Active 44 years 5.000% £465,500 £20,482,000 Low
Dexia £9,000,000 Active 43 years 4.500% £405,000 £17,415,000 Low
Dexia £6,100,000 Active 42 years 4.745% £289,445 £12,156,690 Low
Dexia £5,200,000 Active 25 years 4.875% £253,500 £6,337,500 High
KBC Bank £25,000,000 Active 44 years 4.375% £1,093,750 £48,125,000 Low
Totals:

Previous loans

Bank Principal Status Date ended Interest rate at end date Remaining interest at time of exit Exit fee Rating at exit
Royal Bank of Scotland £20,000,000 Exited 02/07/2019 8.99-10yr GBP ISDA% £63,215,868 £18,454,078 Low
Totals:

What can I do about it?

Some Banks are allowing council’s to exit their LOBO loans early with a reduced penalty fee. If your council holds LOBO loans with these banks, we have listed them below. 

For each bank, we provide a list of the loans exited, and when known the exit fee paid. You can see how much a council saved exiting a loan by comparing the penalty fee with the remaining interest at the time of exit. The rating will show how valuable the loan was considered at the end of the financial year before the exit. 

For each bank, whether loans have been exited or not, we have listed the other councils that hold or held loans with them.  You might want to consider collaborating with councils that still have loans with the same banks to negotiate good exit deals. We also suggest you get in touch with councils that have already exited their loans to learn from their experience.

If you decide to take action, we recommend you bring up the issue within the council and provide the Finance Director with the data on this site, including the downloadable spreadsheet, and the information in the knowledge base. If you struggle to find support within your council, consider seeking independent financial advice. Alternatively, get in touch with us for further guidance.

Royal Bank of Scotland

Royal Bank of Scotland has allowed 34 councils to exit 73 LOBO loans totalling £1.18 billion and has removed the option from 0 LOBO loans totalling 0.

It has 1 outstanding loans with 1 councils totalling £10 million.

Council Principal Date exited Interest rate at exit Remaining interest at time of exit Exit fee Rating at exit
York £5,000,000 12/10/2018 3.600% £7,489,973 £568,044 Average
Redbridge £5,000,000 16/11/18 4.140% £8,104,759 £1,294,708 Average
Harrow £10,000,000 17/10/2018 3.650% £15,107,000 £1,403,821 No data
Gateshead £10,000,000 23/11/2018 3.660% £15,181,479 £1,479,079 Low
Harrow £10,000,000 17/10/2018 3.750% £15,554,795 £1,640,234 No data
Gateshead £10,000,000 23/11/2018 3.780% £15,562,208 £1,755,062 Low
Gateshead £10,000,000 23/11/2018 3.820% £15,490,362 £1,826,979 Low
Gateshead £10,000,000 23/11/2018 3.890% £16,109,929 £2,016,282 Low
Nottinghamshire £10,000,000 21/11/2018 3.980% £19,703,726 £2,413,230 Average
Hertfordshire £10,000,000 01/11/2018 3.900% £23,414,959 £2,698,265 Low
Gateshead £10,000,000 23/11/2018 4.200% £17,313,205 £2,742,090 Low
Kent £10,000,000 03/10/2018 3.950% £19,892,849 £2,800,000 Low
Brighton & Hove £10,000,000 28/10/2018 4.200% £17,371,890 £2,910,931 Average
Gateshead £12,000,000 23/11/2018 3.995% £23,670,539 £2,927,459 Low
Harrow £10,000,000 17/10/2018 4.300% £17,797,288 £2,928,589 No data
Brighton & Hove £10,000,000 28/10/2018 4.220% £17,454,614 £2,956,077 Average
Gateshead £10,000,000 23/11/2018 4.300% £17,774,904 £2,972,939 Low
Brighton & Hove £10,000,000 28/10/2018 4.350% £17,979,205 £3,259,933 Average
East Sussex £11,500,000 29/10/2018 4.390% £19,855,128 £3,786,041 Average
East Sussex £11,500,000 29/10/2018 4.390% £20,864,828 £3,881,654 Average
Birmingham £10,000,000 02/08/2018 4.160% £25,021,545 £4,289,545 Low
Dorset £10,000,000 11/04/2019 4.140% £24,844,537 £4,555,915 Average
Dorset £10,000,000 11/04/2019 4.200% £24,812,219 £4,780,289 Average
Kent £25,000,000 03/10/2018 3.830% £37,227,075 £5,100,000 Average
Croydon £20,000,000 05/11/2018 4.050% £33,649,397 £5,178,668 Low
Kent £25,000,000 03/10/2018 3.830% £38,189,822 £5,200,000 Average
Croydon £20,000,000 05/11/2018 4.070% £33,815,567 £5,257,237 Low
Northumberland £15,000,000 21/09/2018 4.260% £38,250,715 £5,497,910 Average
Brent £10,000,000 29/11/2018 7.350% £30,404,836 £5,800,000 Average
Newcastle upon Tyne £10,000,000 30/11/2018 7.400% £29,338,466 £5,963,180 Average
Hounslow £25,000,000 18/10/2018 4.170% £43,145,219 £6,374,074 Average
Croydon £20,000,000 05/11/2018 4.250% £41,344,932 £6,533,019 Low
Croydon £20,000,000 05/11/2018 4.250% £41,344,932 £6,539,363 Low
Hertfordshire £20,000,000 01/11/2018 4.250% £51,319,041 £7,379,313 Low
Croydon £20,000,000 05/11/2018 4.550% £39,334,438 £7,627,304 Low
Darlington £13,500,000 21/12/2018 7.320% £40,627,203 £8,732,584 Low
Darlington £13,750,000 21/12/2018 7.320% £42,330,908 £9,008,749 Low
Trafford £20,000,000 01/11/2018 7.450% £61,616,603 £11,671,000 Average
Newcastle upon Tyne £20,000,000 30/11/2018 7.400% £58,705,315 £11,843,549 High
Sheffield £20,000,000 11/12/2018 7.400% £60,388,055 £12,330,000 Low
Bolton £18,000,000 08/11/2018 7.9800% £60,856,136 £13,029,274 Low
Birmingham £50,000,000 22/11/2018 4.120% £85,238,849 £17,132,182 Average
Fife £20,000,000 02/07/2019 7.770% £63,215,868 £18,454,078 Low
Cornwall £40,000,000 13/12/2018 6.420% £102,269,721 £18,460,527 Low
Salford £50,000,000 20/11/2018 6.640% £134,046,137 £21,263,519 Low
Cornwall £45,000,000 13/12/2018 7.500% £169,156,849 £35,162,738 Low
Tower Hamlets £60,000,000 21/11/2018 4.320% £107,031,847 £77,852,110 Low
Edinburgh £15,000,000 30/09/2019 7.730% £46,881,921 Withheld Low
Edinburgh £10,000,000 30/09/2019 7.730% £31,254,614 Withheld Average
Edinburgh £10,000,000 30/09/2019 7.700% £31,135,425 Withheld Average
Edinburgh £5,000,000 30/09/2019 7.700% £15,567,712 Withheld High
Lancashire £25,000,000 01/11/2018 6.170% £64,873,747 Withheld Average
Lancashire £25,000,000 01/11/2018 6.170% £64,873,747 Withheld Average
Lincolnshire £10,000,000 12/10/2018 3.800% £15,790,301 Withheld Low
Luton £12,000,000 14/12/2018 4.070% £20,136,799 Withheld No data
Luton £10,000,000 14/12/2018 3.550% £14,719,370 Withheld No data
Newham £25,000,000 03/05/2019 7.772% £79,194,551 Withheld Low
Newham £25,000,000 03/05/2019 7.772% £79,231,814 Withheld Low
Newham £25,000,000 03/05/2019 7.902% £80,400,144 Withheld Low
Newham £25,000,000 03/05/2019 7.902% £80,692,410 Withheld Low
Newham £25,000,000 03/05/2019 7.522% £76,538,926 Withheld Low
Newham £25,000,000 03/05/2019 7.572% £77,083,997 Withheld Low
Northamptonshire £10,000,000 22/10/2018 3.990% £16,532,811 Withheld No data
Northamptonshire £10,000,000 22/10/2018 3.790% £18,730,907 Withheld No data
Northamptonshire £10,000,000 03/05/2019 7.412% £30,259,236 Withheld High
Rochdale £10,000,000 21/10/2018 3.830% £15,852,003 Withheld Low
Shropshire £10,000,000 30/06/2019 4.050% £16,478,507 Withheld No data
Shropshire £7,000,000 30/06/2019 4.020% £11,420,985 Withheld No data
Solihull £10,000,000 27/09/18 4.100% £16,967,260 Withheld Average
Telford & Wrekin £5,000,000 02/08/2018 4.240% £8,808,745 Withheld Average
Telford & Wrekin £5,000,000 02/08/2018 3.990% £9,878,256 Withheld Low
Telford & Wrekin £5,000,000 02/08/2018 3.990% £9,877,163 Withheld Low
Telford & Wrekin £5,000,000 02/08/2018 3.990% £9,872,790 Withheld Low
Totals:

Councils that still have loans with Royal Bank of Scotland include:

North Lanarkshire
Barclays

Barclays has allowed 1 councils to exit 4 LOBO loans totalling £20 million and has removed the option from 403 LOBO loans totalling £3.79 billion.

It has 403 outstanding loans with 143 councils totalling £3.79 billion.

Council Principal Date exited Interest rate at exit Remaining interest at time of exit Exit fee Rating at exit
Gloucester £5,000,000 11/05/2015 3.890% £4,865,697 £397,000 No data
Gloucester £5,000,000 07/05/2015 3.890% £5,060,730 £397,000 No data
Gloucester £5,000,000 12/05/2015 3.990% £4,990,779 £497,000 No data
Gloucester £5,000,000 10/05/2015 3.990% £4,992,419 £497,000 No data
Totals:

Councils that still have loans with Barclays include:

Aberdeen, Aberdeenshire, Adur, Angus, Antrim & Newtownabbey, Ards and North Down, Argyll & Bute, Ashfield, Barking & Dagenham, Birmingham, Blackburn with Darwen, Blackpool, Bolton, Bradford, Brent, Brighton & Hove, Bristol, Bury, Caerphilly UA, Cambridgeshire, Cheltenham, Cheshire West and Chester, Clackmannanshire, Colchester, Conwy, Cornwall, Darlington, Derbyshire, Devon, Dorset, Dumfries & Galloway, Dundee, Durham, East Ayrshire, East Dunbartonshire, East Lothian, East Sussex, Edinburgh, Essex, Falkirk, Fenland, Fife, Gateshead, Glasgow, Gloucestershire, Great Yarmouth, Greater Manchester, Greenwich, Gwynedd, Hampshire, Harrow, Hartlepool, Hertfordshire, High Peak, Highland, Hillingdon, Hounslow, Inverclyde, Ipswich, Kent, Kingston upon Thames, Kirklees, Knowsley, Leeds, Leicester, Leicestershire, Lincoln, Liverpool, Luton, Manchester, Merton, Midlothian, Milton Keynes, Moray, Newark & Sherwood, Newcastle upon Tyne, Newham, Newport, Norfolk, North Ayrshire, North East Lincolnshire, North Lanarkshire, North West Leicestershire, Northampton, Northamptonshire, Northumberland, Nottingham, Nottinghamshire, Oldham, Oxfordshire, Pembrokeshire, Plymouth, Powys, Preston, Reading, Redbridge, Redcar & Cleveland, Redditch, Rhondda Cynon Taff, Richmond upon Thames, Rochdale, Rotherham, Rugby, Salford, Sandwell, Scarborough, Scottish Borders, Sheffield, Slough, Solihull, Somerset, Somerset West & Taunton, South Ayrshire, South Gloucestershire, South Tyneside, St Helens, Stockport, Suffolk, Sunderland, Surrey, Swansea, Tameside, Telford & Wrekin, Thurrock, Torbay, Torfaen, Tower Hamlets, Trafford, Walsall, Waltham Forest, Warrington, West Dunbartonshire, West Lothian, West Suffolk (Forest Heath), West Yorkshire, Wiltshire, Windsor & Maidenhead, Wirral, Woking, Wokingham, Wolverhampton, Wrexham, Stockton-on-Tees
Bayerische LB

Bayerische LB has allowed 0 councils to exit 0 LOBO loans totalling 0 and has removed the option from 0 LOBO loans totalling 0.

It has 53 outstanding loans with 34 councils totalling £502.7 million.

Councils that still have loans with Bayerische LB include:

Aberdeenshire, Argyll & Bute, Brighton & Hove, Cheltenham, Cornwall, Devon, East Staffordshire, Fife, Glasgow, Hartlepool, Inverclyde, Kingston upon Hull, Kingston upon Thames, Kirklees, Lewisham, Liverpool, Medway Towns, Merton, Middlesbrough, Milton Keynes, Monmouthshire, Newcastle upon Tyne, Newham, Newport, North Lanarkshire, Northumberland, Redcar & Cleveland, Torfaen, Wakefield, Waltham Forest, Warrington, Wiltshire, Wirral, Wrexham
Commerzbank

Commerzbank has allowed 8 councils to exit 19 LOBO loans totalling £172.3 million and has removed the option from 0 LOBO loans totalling 0.

It has 189 outstanding loans with 89 councils totalling £1.65 billion.

Council Principal Date exited Interest rate at exit Remaining interest at time of exit Exit fee Rating at exit
Powys £5,000,000 07/12/18 4.450% £6,642,692 £1,312,064 Average
Buckinghamshire £4,000,000 18/09/2017 4.110% £9,942,822 £2,088,077 Low
Coventry £5,000,000 23/01/2018 4.750% £8,595,548 £2,636,102 Average
Coventry £5,000,000 23/01/2018 4.750% £8,595,548 £2,636,102 Average
Coventry £5,000,000 23/01/2018 4.750% £8,595,548 £2,636,102 Average
Coventry £5,000,000 23/01/2018 4.750% £8,595,548 £2,636,102 Average
Redcar & Cleveland £3,000,000 27/07/2018 4.750% £6,870,452 £5,076,230 Low
Plymouth £11,000,000 11/04/2018 4.490% £23,570,532 £6,640,723 Low
Buckinghamshire £16,000,000 04/12/2018 4.340% £41,161,749 £9,261,283 Low
Redcar & Cleveland £6,000,000 27/07/2018 4.180% £14,435,086 £9,466,866 Low
Redcar & Cleveland £6,000,000 27/07/2018 4.200% £14,756,844 £9,533,263 Low
Buckinghamshire £16,000,000 04/12/2018 4.290% £40,685,655 £9,616,511 Low
Buckinghamshire £16,000,000 04/12/2018 4.220% £40,019,936 £9,870,244 Low
Derbyshire £8,000,000 26/02/2018 4.700% £9,226,937 Withheld High
Derbyshire £5,000,000 26/02/2018 4.850% £5,810,034 Withheld High
Knowsley £5,000,000 18/04/18 3.860% £9,137,096 Withheld Low
Leicester £22,300,000 30/06/2018 4.600% £35,579,803 Withheld No data
Leicester £21,000,000 30/06/2018 4.600% £34,471,644 Withheld No data
Leicester £8,000,000 30/06/2018 4.600% £13,132,055 Withheld No data
Totals:

Councils that still have loans with Commerzbank include:

Angus, Antrim & Newtownabbey, Ards and North Down, Argyll & Bute, Ashfield, Barnet, Bath & North East Somerset, Blackpool, Blaenau Gwent, Bolton, Braintree, Brent, Bristol, Bury, Caerphilly UA, Conwy, Doncaster, Dundee, Durham, Ealing, East Ayrshire, East Lothian, East Sussex, Fife, Glasgow, Greenwich, Halton, Hampshire, Haringey, High Peak, Hounslow, Inverclyde, Isle of Wight, Kingston upon Hull, Kingston upon Thames, Kirklees, Leeds, Lincoln, Liverpool, Manchester, Mansfield, Merthyr Tydfil, Middlesbrough, Monmouthshire, Moray, Neath & Port Talbot, Newcastle upon Tyne, Newport, Norfolk, North Ayrshire, North Tyneside, North West Leicestershire, North Yorkshire, Northamptonshire, Northumberland, Nottingham, Nottinghamshire, Oxfordshire, Peterborough, Powys, Redbridge, Redcar & Cleveland, Renfrewshire, Rochdale, Rotherham, Sandwell, Scottish Borders, Sheffield, Somerset, South Ayrshire, South Tyneside, Southampton, Suffolk, Swansea, Thurrock, Torfaen, Wakefield, Waltham Forest, Warrington, West Dunbartonshire, Westminster, Wirral, Worcestershire, Barnsley, Dudley, Edinburgh, St Helens, Medway Towns, Wolverhampton
Dexia

Dexia has allowed 0 councils to exit 0 LOBO loans totalling 0 and has removed the option from 0 LOBO loans totalling 0.

It has 312 outstanding loans with 110 councils totalling £2.95 billion.

Councils that still have loans with Dexia include:

Aberdeen, Aberdeenshire, Ashfield, Barking & Dagenham, Bassetlaw, Birmingham, Blackburn with Darwen, Bolton, Bradford, Brent, Brighton & Hove, Bristol, Buckinghamshire, Bury, Cambridgeshire, Camden, Cardiff, Cheshire East, Clackmannanshire, Colchester, Cornwall, Coventry, Croydon, Darlington, Derbyshire, Doncaster, Dundee, Durham, Ealing, East Lothian, Edinburgh, Falkirk, Fife, Gateshead, Glasgow, Gloucestershire, Great Yarmouth, Greenwich, Haringey, Harrow, Hartlepool, Herefordshire, Hertfordshire, Highland, Hillingdon, Hounslow, Kent, Kingston upon Thames, Kirklees, Leeds, Leicester, Leicestershire, Lewisham, Liverpool, Luton, Manchester, Medway Towns, Mid Suffolk, Midlothian, Neath & Port Talbot, Newcastle upon Tyne, Newham, Newport, Norfolk, North Ayrshire, North East Lincolnshire, North Yorkshire, Northamptonshire, Northumberland, Nottingham, Nottinghamshire, Oldham, Oxfordshire, Perthshire & Kinross, Peterborough, Plymouth, Redbridge, Redcar & Cleveland, Rochdale, Rotherham, Salford, Sandwell, Scottish Borders, Sheffield, Shropshire, Slough, Solihull, Somerset, St Helens, Staffordshire, Stoke-on-Trent, Suffolk, Sunderland, Sutton, Swansea, Tameside, Telford & Wrekin, Thanet, Torbay, Trafford, Walsall, Warrington, West Lothian, Westminster, Wiltshire, Windsor & Maidenhead, Woking, Wolverhampton, York, Stockton-on-Tees
KBC Bank

KBC Bank has allowed 0 councils to exit 0 LOBO loans totalling 0 and has removed the option from 0 LOBO loans totalling 0.

It has 28 outstanding loans with 24 councils totalling £286.4 million.

Councils that still have loans with KBC Bank include:

Angus, Bath & North East Somerset, Bristol, Cornwall, Darlington, East Lothian, Fife, Kingston upon Thames, Manchester, Medway Towns, Neath & Port Talbot, Northamptonshire, Northumberland, Oldham, Perthshire & Kinross, Plymouth, Rhondda Cynon Taff, Rochdale, Salford, Swansea, Tameside, Telford & Wrekin, West Lothian, Wrexham