Group of councils launches claim over LOBO loans

July 26, 2018

A group of local authorities has issued a protective claim against Barclays bank regarding its involvement in manipulation of the LIBOR benchmark rate and the impact of this on their ‘lender-option, borrower-option’(LOBO) loan transactions with the bank.

Lianne Craig, a partner in law firm Hausfeld, told Local Government Lawyer that her firm was acting for the group on this case.

A report in the Daily Mail has stated that 14 authorities are suing Barclays over the way LIBOR rates affected charges to borrowers for LOBOs.

Campaign group Debt Resistance UK has said LOBOs are loans for typically 40 to 70 years where the lender has the option to propose or impose a new fixed rate on specified dates.

Borrowers can accept the new rate or repay the entire loan but with a penalty.

The group said that the complexity of derivatives meant the overall interest rate of the loans was difficult to price over the long term, without sophisticated pricing tools that the majority of local authorities lacked.

It said its analysis of LOBO loan contracts showed some councils faced 7-9 % interest rates, more than twice the current rate charged by the Public Works Loans Board.

Mark Smulian

A&M Bacon

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