Strategic PWLB borrowing
About this course
Fix-now vs delay decisions, maturity profile management, internal vs external borrowing, combining rate types within a programme.
What you'll learn
- Strategic decisions
- Fix-now vs delay
- Tenor & maturity profile
- Internal vs external
- Combining types & structures
Part of these pathways
Related courses
- PWLB explained
- PWLB repayment structures
- PWLB break costs — mechanics & live calculator
- Debt restructuring
- Reading the PWLBpredict
- Reading PWLB activity
Common questions
What is Borrowing in advance of need?
Drawing PWLB before the cashflow requirement. TM Code permits if (a) clear business case and (b) for current capital programme, future debt maturities, or to ensure adequate short-term investment liquidity. Most common reason: locking in rates ahead of expected rate rises.
What is Borrowing rationale documentation?
Each material borrowing decision should have documented rationale covering: scheme funded; tenor selected with reasoning; rate-type chosen; timing decision; alternatives considered. Audit increasingly looks for this in board papers.
What is Delay decision?
Deferring borrowing — funding interim need from internal balances or short-term sources. Captures rate-fall benefit if it materialises; risks rate-rise cost. Most LA cashflow forecasts can sustain 3-12 month deferral; longer requires substantive cash management.
What is Fix-now decision?
Taking PWLB borrowing today at prevailing rates rather than waiting. Locks in current rate; eliminates rate-rise risk; surrenders rate-fall benefit. The dominant LA borrowing decision question.
What is Implied spread to gilts?
PWLB rates are gilts at average-life maturity plus a published spread (Standard +100bps, Certainty +80bps, HRA +40bps, UKIB +40bps). Comparing PWLB rate to live gilt yield gives the implied spread; should match the published spread within a few bps allowing for DMO smoothing and rounding.
What is Internal borrowing?
Using cash balances (working balances + reserves) to fund capital expenditure rather than taking external debt. Reduces actual external borrowing; CFR unchanged. The gap between CFR and external debt is the internal borrowing position. Saves spread between PWLB rate and investment yield.