Kent County Council has 25 Lender Option, Borrower Option (LOBO) Loans on its books, worth £442 million, signed between 2005 and 2011, with Barclays, RBS, Dexia and Depfa.
Butlers (an ICAP subsidiary) was the Treasury Management Advisor (TMA) to Kent in all cases, whilst parent company and broker ICAP, actioned 23 out of 35 LOBO loan transactions, with Tullet Prebon, with RP Martins responsible for one LOBO loan trade each.
Brokerage fees on the 25 LOBO loans are greater than £1 million, with approximately £950,000 going straight into the pockets of ICAP/ Butlers in the form of kickback payments.
Independent financial analysis of Kent County Councils LOBO loan portfolio, and resulting financial position by financial analyst Nicholas Dunbar and Gary Kendall established that Barclays, RBS and Dexia recorded an upfront trading profit on day one of £23 million from the embedded derivatives in the Kent LOBOs.
To exit the LOBO loan contracts (as at October 2014) would cost Kent County Council £716 million, and the difference between this figure, and the value of the LOBO loans as represented in Kent’s annual accounts £200.7 million is greater than the entire Kent adult social care budget.
As of the 1St April 2016 the figure to exit would be closer to £800 million.