Issue - meetings

That Cabinet approve:

a)       the additional £13,591,929 to be added to the Capital programme, making a total capital budget of £25m;

b)       the variation to the Facility Agreement to accommodate the power to vary the agreement and the extension to the cap on the facility from £12m to £25m; and

c)        subject to the subsidy control advice, to delegate responsibility to the Portfolio Holder for Strategy, Performance & Finance to amend the Facility Agreement to ensure the agreement remains subsidy control compliant.

The Business Manager - Financial Services presented a report which provided an update on the current credit facility with Arkwood Developments Ltd. and sought approval to extend the loan cap to accommodate the company’s current development programme. It was noted that there was an exempt report which contained commercially sensitive information which had been redacted from the open version.

In order to accommodate the current developments progressing, there was a need to increase the maximum permitted facility. Currently the maximum amount that could be loaned to the company was £11,408,071.  Based on Arkwood’s forecast Medium Term Financial Plan, they were expecting a spike in borrowing requirement which was forecast to be in excess of the current facility cap over the next half year. There was a need to increase the current cap to a proposed £25m. The £25m included head room of £3.787m against the current forecast maximum point, meaning should sales receipts not materialise, or earlier than expected spend occur, there was sufficient head room within the agreement to accommodate the additional borrowing requirement.

The Cabinet considered the risks around increasing the loan facility but these were mitigated by way of a debenture on all assets of the company and performance will be continued to be monitored by the Executive Shareholder Committee.  

AGREED (unanimously) that Cabinet approve:

a)       the additional £13,591,929 to be added to the Capital programme, making a total capital budget of £25m;

b)       the variation to the Facility Agreement to accommodate the power to vary the agreement and the extension to the cap on the facility from £12m to £25m; and

c)        subject to the subsidy control advice, to delegate responsibility to the Portfolio Holder for Strategy, Performance & Finance to amend the Facility Agreement to ensure the agreement remains subsidy control compliant.

Reasons for Decision:

To ensure that the Council’s wholly owned company are able to meet their contractual commitments and complete the existing developments. This aligns with Ambition two within the Council’s Community Plan ensuring which has a specific action relating to ‘Develop new homes for open market sale or rent through Arkwood Developments Ltd’.

Options Considered:

Should the recommendation not be approved, this would impact on Arkwood’s ability to be able to progress the sites they are contractually obliged to complete and would force the company to seek external finance.