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Diane Aderyn, Finance Director, welcomes Lloyds TSB as a new financial partner
Diane Aderyn, Finance Director, welcomes Lloyds TSB as a new financial partner

Internal News - 23 May 2008

University secures innovative funding package for its investment strategy

Message from Lloyds TSB:

The University of Bath has worked in partnership with Lloyds TSB Corporate Markets to secure a multi-million funding package, which includes an innovative hedging facility – the first of its kind to be used in the Higher Education sector. As part of a total funding package of £104 million, Lloyds TSB is supplying £52 million, half of which is being used for refinancing, and half for academic and student campus development.

One of the top universities in the UK, the University of Bath is home to some 12,000 students. The University has a formidable international reputation for teaching and research, particularly in science and engineering, an outstanding sporting tradition with superb facilities and elite athletes, and has been a leading advocate of Knowledge Transfer across sectors.

This new funding package will allow continued strategic investment in key areas of growth, both academic and in terms of physical infrastructure. The complex deal, delivered on time by Lloyds TSB, includes a groundbreaking inflation hedging facility, a Limited Price Index (LPI) inflation swap, the first such swap in Higher Education. By entering into an LPI swap (alongside traditional interest rate hedging), debt servicing costs for the University are linked to Retail Price Index (RPI) movements, ultimately better matching the University’s expenses against its income stream.

Diane Aderyn, Finance Director, University of Bath, said: “The University is home to world-class innovation, academic excellence, and creative enterprise, so it’s only fitting that we have a financial partner that combines sector banking expertise with innovative solutions. Lloyds TSB has provided us with a refinancing structure flexible and sophisticated enough to support our strategic growth and expansion. And the University will benefit directly from the additional inflation swap.”

Tony Larkin, Relationship Director, Lloyds TSB Corporate Markets, commented: “The University of Bath is a model institution, both a centre for academic excellence, and an extremely well managed business. We’re delighted to enter into a long-term partnership with the University and offer our most up-to-date hedging solutions as part of an overall package that meets its needs. And we’re also delighted that the University of Bath is the first HE institution in the UK to make use of our landmark LPI-linked funding.”

Liz Duthie, Director, Financial Market Sales, Lloyds TSB Corporate Markets, explained the innovative hedging solution offered to Bath: “We wanted to find a solution that would mitigate the risks of servicing debt with student rental incomes – namely low inflation. Instead of looking at straightforward interest rate hedging we proposed a structure which locked the hedging into a limited price index (LPI) swap. This meant that the University of Bath would offset any potential reduction in income with a reduction in LPI-linked debt payments, while at the same time capping the maximum interest rate payable on the debt if inflation increased beyond X%.”