The last 12 months have been remarkable for changes at UK councils hobbled by lender option borrower option (LOBO) loans.
After years of denying the problem, attitudes at councils are changing, typified by the toppling of Newham’s long-standing mayor last year in favour of a transformative candidate, Rokhsana Fiaz. Multiple lawsuits have been filed by councils against the biggest LOBO lender, Barclays.
Meanwhile, there has been a wave of restructurings of LOBO loans by UK councils. According to results of Freedom of Information requests conducted by Risky Finance, among 55 of the largest LOBO borrowers surveyed, 21 of them reported refinancing some of their loan portfolio during this period.
In particular, two banks – RBS and Germany’s Commerzbank – decisively changed the LOBO landscape by offering terms that allowed councils such as Croydon and Cornwall to repay £1 billion of loans at a significant discount. The majority of these redemptions came before Newham council announced repayment of £150 million of RBS inverse floaters in May, a deal that I helped negotiate as a senior consultant for Vedanta Hedging Limited.