Aberdeen looks to raise £1bn capital funding through private bonds

Aberdeen City Council could become the first local authority to raise funds on capital markets as it embarks on a number of major housebuilding and construction projects.

The council said the index-linked bonds may be launched in the near future “subject to market conditions”.

Applications will be made to the UK Listing Authority for the bonds to be admitted to the official list and to the London Stock Exchange for the bonds to be admitted to trading on the London Stock Exchange’s regulated market.

The funding could be used to support a £1 billion capital programme which includes major projects such as the new Aberdeen Conference Centre.

In the next five years, the council is also due to spend £159m on projects such as new build homes at the Smithfield School and Manor Walk sites and work on SQHS and Energy Efficient Standards for Social Housing (EESSH) initiatives.

Aberdeen City Council has already become the first in Scotland to be given a credit rating, with Moody’s Investors Service confirming an Aa2 issuer credit rating earlier this month.

Council leader Jennifer Laing said: “The prospect of a bond issue has the potential to be one of the most significant events in the history of our city.

“Following on from the assignment of the credit rating, it would be another first for a Scottish local authority and we are proud to be leading the way with innovation in public sector finance.”

She added: “By being proactive in our approach to capital funding, we are clearly being mindful of our duty to protect the revenue budget which is the bedrock of our service delivery.”

Finance convener Willie Young added: “We have explored a wide range of options as we continue our investment in a capital programme which will support the city’s growth and diversification during a crucial period for the region.

“The launch of a bond issue would be a hugely important step forward.”

The plan has the backing of the Scottish Government which believes other local authorities could go down a similar route.

Finance secretary Derek Mackay said: “We welcome Aberdeen City Council’s innovation in using the capital markets as a route to finance.

“Investment in infrastructure throughout the country is vital to Scotland’s future and this bond issue has the potential to support a number of key projects in Aberdeen in the years ahead. It is a funding mechanism which has great potential for wider use in Scotland.

“These key projects planned for Aberdeen in the years ahead will be good for the city, for the North-East and for Scotland as a whole.”