Boris Johnson has announced plans for a £600m bond issue to help finance the construction of Crossrail.
The bonds will be issued through a vehicle developed for the Greater London Authority – which is required to borrow £3.5bn for its share of the scheme’s £14.8 billion cost – by Lloyds Bank Corporate Markets.
The GLA has already borrowed £800m from the Government’s Public Works Loan Board. The Mayor says he decided on the bonds issue after the Government increased the cost of borrowing from the Board.
London’s borrowing for the scheme is to be repaid by a Business Rate Supplement levied on the capital’s largest businesses.
City Hall says an early repayment option could shorten the term of the BRS, which is forecast to run until 2035, leading to savings for business.
Mr Johnson said: “Crossrail is going to transform our city but it must be cost effective , especially for London’s businesses. This is a great example of the public and private sectors coming together and delivering an innovative solution to bear down on borrowing costs.
“I hope this is a model local government can develop for other important improvements we make to the capital and beyond.”
Andrew Géczy, CEO of Wholesale Markets and Co-head of Lloyds Bank Corporate Markets said: “It is more than 17 years since a mainstream local authority has secured finance via the public markets, so this transaction is significant as well as innovative.
“We are delighted to have assisted the GLA to access the public markets and we fully expect other local authorities to follow their lead.”
Mr Géczy added: “The note issuing programme framework we have created for the GLA will be of real benefit to the local authority sector as a whole.
Local authorities wanting to raise financing, even relatively small sums in comparison to that raised by the GLA, will be able to access the capital markets to help them deliver their local projects and to do so in a more cost effective manner, and in a manner which is more administratively efficient as well.”