Royal Bank of Scotland signalled an end to its controversial “lobo” loans taken out by UK councils by allowing one of the biggest borrowers to pay back its debt early, the Standard can reveal.
Kent County Council, which took out £60 million worth of RBS lobo between 2008 and 2011, repaid the expensive loan early on October 1 after the bank indicated it wanted to remove the loans from its balance sheet.
The long-term debt, which carried a 4% interest rate over the next 50 years, has been paid back by using a shorter-term government loan charging around 2.5%.
Kent will pay a £13.4 million premium to escape the contract, which can be written off over the next 50 years.
RBS declined to comment on the deal due to client confidentiality but said it was “open to discussions” with customers should any circumstance change.
Debt campaigner Joel Benjamin said Kent’s deal was good for taxpayers and called on the bank to extend the refinancing option to other councils.
Bank lobos are controversial because they are considered ill-suited for councils, which can borrow more cheaply from the Treasury.
In 2016, Barclays effectively scrapped lobos by transforming them into fixed-rate loans.
