Pension Insurance Corporation, a specialist insurer of defined benefit pension funds, has invested £250 million in debt issued by the City of London Corporation for an ambitious programme of major projects designed to benefit the Square Mile, London and the UK.
The projects include the proposed relocation and development of three of the city’s historic wholesale food markets – Billingsgate (fish), Smithfield (meat) and New Spitalfields (fruit, veg and flower) markets – to a former power station site in Barking. It would also help fund the Museum of London’s relocation to West Smithfield.
The investment will not be drawn down by the City Corporation until 2021, locking in borrowing costs. The transaction was jointly arranged by Lloyds Bank and Santander.
PIC was awarded the largest share of the £450 million transaction, reflecting the company’s reputation as a significant investor in social infrastructure. The proceeds will refinance a £125 million bridge loan used to acquire the Barking site, as well as preparing the site for development. The City Corporation is the governing body of the Square Mile and the oldest continuous municipal democracy in the world.
Jeremy Mayhew, chair of the finance committee at the City of London Corporation, said: “The team showed great flexibility and knowledge in structuring this investment so that it meets our need to draw down the funds this year and in 2021.”
This type of long-dated investment provides a good match for PIC’s long-term liabilities with a tailored maturity profile, added Allen Twyning, head of debt origination at PIC.
“This is an important financing which demonstrates strong investor interest and confidence in the City of London,” said Stephen Valvona, director of private placements at Lloyds Bank. He explained that the transaction reflects the flexibility of the private placement market, enabling the City of London to achieve a broad spread of maturities from 25-45 years, attract a mix of delays to funding to suit its requirements, and secure favourable long-term pricing.