2020-12-08 Services & Organisation Committee Agenda

SERVICES & ORGANISATION COMMITTEE MEETING AGENDA                              8 DECEMBER 2020


2    DEBT REFINANCING INVESTIGATION

Author            Director Corporate Services, Michael Shave
                  Corporate Services Department

Index             ECM/ 22.08 Loans Queensland Treasury Corporation

Attachments       1.   Debt Refinancing Options



EXECUTIVE SUMMARY
Not applicable.

RECOMMENDATION
That Council note the report by the Director Corporate Services to the Services & Organisation
Committee Meeting dated 8 December 2020 and:
A.   Agree in principle to the 20 year fixed interest refinancing of Council’s current total debt
     balance at the latest applicable QTC borrowing rate;
B.   Agree to recapitalise the early repayment adjustment through the refinancing transaction to
     ensure cash reserves are maintained; and
C.   Authorise the Chief Executive Officer to submit an application by 26 February 2021 to the
     Department of State Development, Infrastructure, Local Government and Planning seeking
     borrowing approval for the refinancing transaction.



REPORT
Background

As part of its COVID-19 pandemic economic response the Queensland Government announced a
local government debt refinancing program, to allow councils to refinance and extend the loan term
on some or all of their existing fixed debt with Queensland Treasury Corporation (QTC) to take
advantage of the current low interest rate environment.

The primary goals of the debt refinancing program are to:
    Provide councils with an opportunity to free up additional cash flows through reduced loan
     repayments that could be utilised to stimulate local economies and / or assist with council
     financial sustainability management.; and
    Lock current low interest rates on long-term debt in for an extended period.

Fixed rate loans are required to be refinanced at market value. The difference between the loan
book value and the market value is the early repayment adjustment (ERA). Council undertook a
liquidity review in 2019 that resulted in a loan repayment of $10 million from surplus cash holdings
(relating to high interest debt inherited at de-amalgamation). This transaction also included an ERA
which was funded at the time via cash.

The new initiative announced by the Queensland Government allows the early repayment
adjustment to be funded either by cash and/or debt or a combination of the two, where previously
an ERA had to be paid for via cash.

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