Dear Department of Internal Affairs,

I note that you have the Local Government Funding Agency under your administration,

As the LGFA constitutes a council-controlled organisation” under the Local Government Act 2002, please supply the following information under the Official Information Act (OIA) and or Local Government Official Information and Meetings Act (LGOIMA):

1. What is the company that the LGFA is registered as under the Companies Register?
2. What are the sources of funds being the guaranteed creditors and or beneficiaries, if any, available to the LGFA that were not available under the previous lending regime, where the LGFA can raise funds?
3. Are the funds hedged using interest rate swaps or derivatives of any nature?
4. How is each Local Authority and or guarantor protected from other defaulting guarantors and or local authorities?

Yours faithfully,

Andrew Mitchell

Dear Enquiries / Mr Mark Butcher, CEO

Thankyou for your response.

In your response, you have stated;
“LGFA cannot seek to recover this amount from other local authorities.”
and
“Local authorities do not provide a guarantee of another local authority's debt.”

Your response also states;
“When LGFA borrows money, its obligations are guaranteed by most of the local authorities who participate in the LGFA borrowing structure (LGFA Guarantee).”
and
“If a guarantor fails to pay its pro-rata share of a demand under the LGFA Guarantee, the Security Trustee will make further demands on the other guarantors for payment of the unpaid amount on a pro-rata basis until the outstanding amounts are paid in full.”

It is worth noting here, that your ‘LGFA An Overview’ document on your website also states;
”…[a] council… [who is a guarantor], [provides] a guarantee [which] will be in favour of the obligations of LGFA. Any call under the guarantee will be allocated across *all the guarantors* on a pro rata basis in relation to their rates revenue.”
Your ‘Amendment and Restatement Deed (Guarantee and Indemnity)’ [document 3756987 v6] it states;
3.4(b)
“…[LGFA] shall deliver a Demand to each Guarantor requiring the Guarantor to pay the proportion of the relevant amount…”
and
3.4(c)
“…if one or more Guarantors fails to pay in full its Relevant Portion of a Relevant Amount… …the [LGFA] may deliver a further Demand to *each Guarantor other than the Defaulting Guarantors requiring that Non-Defaulting Guarantor to pay the proportion of the Shortfall Amount…”
“…for each Non-Defaulting Guarantor , its *Additional Relevant Proportion*…”
and
3.4(d)
“…if one or more Non-Defaulting Guarantors fails to pay in full its Additional Relevant Proportion… …the [LGFA] may deliver a further Demand to each other Non-Defaulting Guarantor… …shall apply to the relevant shortfall amount *and such other Non-Defaulting Guarantors…”
and shall
“…continue to apply until the Relevant Amount has been paid in full to the [LGFA].”

My points and hence the questions are;
1. Your statements made in response to my original OIA seem incorrect; is it not true that whilst a council (Guarantor) may not be directly responsible for a “Defaulting Guarantor's” specific or actual debt, however a council (Guarantor) may receive a Demand as a Non-Defaulting Guarantor, and
2. To clarify my question around a councils protection from other defaulting Guarantors (question 4), and given clause 16.9(d) of the aforementioned deed, is there no limitation to the continuance of the Demand to Non-Defaulting Guarantors, OTHER THAN those specified in clause 3.4 (a) - (d) where the Demand is a proportion of the Relevant Amount based on a pro rata allocation of the rates revenue?

Yours sincerely,

Andrew Mitchell

Dear Enquiries,

Does the quoted section from my previous OIA request, following here;

"Your ‘Amendment and Restatement Deed (Guarantee and Indemnity)’ [document 3756987 v6] it states;
3.4(b)
“…[LGFA] shall deliver a Demand to each Guarantor requiring the Guarantor to pay the proportion of the relevant amount…”
and
3.4(c)
“…if one or more Guarantors fails to pay in full its Relevant Portion of a Relevant Amount… …the [LGFA] may deliver a further Demand to *each Guarantor other than the Defaulting Guarantors requiring that Non-Defaulting Guarantor to pay the proportion of the Shortfall Amount…”

...mean that a non-defaulting council (Guarantor) may be required to pay a defaulting council's (Guarantor's) 'relevant portion' of the 'relevant amount' under the terms and conditions of the LGFA loan arrangement?

Yours sincerely,
Andrew Mitchell

Dear Enquiries,

Thankyou. So to clarify, and in layman's terms, a council who has not defaulted may receive a demand to pay (a proportion of a particular amount) towards a loan or loans of a defaulting council?

Yours sincerely,

Andrew Mitchell

Dear Enquiries,

So to clarify, again, and in layman's terms, a council who has not defaulted may receive a
demand to pay (a proportion of a particular amount) towards a loan or loans of a
defaulting council, notwithstanding that the non-defaulting (or any other) Council does NOT provide a WARRANTY over a defaulting (or any other) Council?

This isn't an issue around a warranty, but rather whether a demand can be placed on a non-defaulting council for rates for a defaulting-council - which is what 3.4(b) and 3.4(c) (previously quoted) seems to state.

Yours sincerely,
Andrew Mitchell