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Vedanta Hedging saves £143m for Newham Council



Vedanta Hedging Ltd helped The London Borough of Newham (“Newham”) negotiate a deal last month with bank NatWest over its Lender Option Borrower Option (“LOBO”) loans that will save the Council up to £143m allowing more money to be spent on services for residents.


The agreement allowed Newham to pay off the inverse floater LOBO loans it had with the Royal Bank of Scotland subsidiary at a considerably lower rate of interest, saving the equivalent of £3.5m per year over 41 years, which was the length of time the loans still had to run.


In order to pay off the LOBO loans that Newham had with the bank, the Council entered into loans with the Public Works Loan Board (“PWLB”) at a far lower rate of interest. The PWLB is a body that lends Government money to councils.

The deal, which was agreed following lengthy negotiations by Vedanta Hedging with the bank, will put the Council in a position to take advantage of current low borrowing rates.


Six LOBO loans, each worth £25 million, were taken out with RBS in 2009 by Newham. Exiting the loans will remove risk and improve the Council’s financial standing in a time of austerity while freeing up cash that the Council can spend for Newham residents.


The Mayor of Newham, Cllr Rokhsana Fiaz, said:


I made a promise to Newham residents in my election manifesto that I would rid the scourge of LOBO loans from Newham Council. After just a year in office I have made a significant step towards achieving this.


“I would like to thank Abhishek and Nick for their help with negotiating this deal for the council”.


Commenting on the agreement, financial experts Nicholas Dunbar and Abhishek Sachdev of Vedanta Hedging, derivative consultants authorised by the Financial Conduct Authority, said that based on publicly available information, the Newham deal is the best that any UK local authority has achieved to date on their LOBO terminations with the bank.


Nick Dunbar and Abhishek Sachdev worked on the Channel 4 Dispatches programme in 2015 which led to widespread awareness of these mis-sold LOBO loans, and Vedanta Hedging has also provided live evidence to the Communities and Local Government on this very issue.


If you would like to discuss any aspect of Council borrowing or LOBO loans, please don’t hesitate to contact us.