C&RT to borrow £150m via bonds

January 2018 - Canal & River Trust is about to raise £150m in 2018 by issuing bonds. This follows a disappointing financial year where the value of its assets has fallen due to a rise in pension fund deficit. Allan Richards provides the details.

Although no announcement has been made, C&RT told a Defra Grant Review Meeting in December that it intends to raise £100m this month (January 2018) and a further £50m in June via the private placement of long dated (i.e. 25, 30 and 35 year) fixed rate bonds.

C&RT stated that they were able to do this 'at attractive rates' (no actual figure was given) after securing a private credit rating. The meeting was attended C&RT chair Allan Leighton, who was accompanied by chief executive, Richard Parry, and Finance Director, Sandra Kelly.

Bizarrely, C&RT provided this information to Defra as an efficiency saving!

The raising of £150 via a bond issue follows closely behind the raising of £50m via a Revolving Credit Facility. In C&RT 2014/15 C&RT spent £200,000 arranging a £25m Revolving Credit Facility (RCF) with RBS.

This facility allowed for up to £25m to be borrowed by C&RT for periods between one month and the date of the facility’s expiry in June 2019. The RCF has a rate of interest 1.75 per cent above London Interbank Offered Rate (LIBOR).

C&RT did not make immediate use of the RCF. It was not until the 2016/17 financial year, when the amount that could be drawn down was doubled to £50m, that it acted. C&RT borrowed the whole amount. £10m for repayment in June 2017 and a further £40m for repayment in April 2019.

C&RT also has a loan of £13m inherited from British Waterways. When BW became C&RT, its few debts were written off with the exception of £13m owed to Port of London Properties (POLP). POLP had sold property to BW with payment being deferred for a number of years as a loan which attracted a floating rate of interest one per cent above the Bank of England base rate. This loan period was extended and now the £13m is currently repayable in January 2019. The amount owed is secured against non-operational property.

It has always been claimed that one of the advantages of being a charity rather than a quango is that it gives freedom from government restrictions on borrowing. However, don't be fooled that the £150m now being raised will be used for the immediate improvement of C&RT's waterways. Instead, like the £50m raised in 2016/17, it will be invested with a view to both increasing the value of C&RT's assets and producing an income.

Hopefully, that income will be higher than the loan repayments and management overheads ... ​

Photos: (1st) Richard Parry explained the borrowing to government, (2nd) Alan Leighton explained the borrowing to government, (3rd) The relevant details, (4th) Sandra Kelly explained the borrowing to government.