Banking, capital projects, asset financing, and commercial
Schools and colleges undertaking capital projects may need to borrow significant sums of money from the bank and then maintain the bank's confidence that the school will be able to keep to its repayment schedule. Other factors to take into account include:
- The detailed terms of the facility letter.
- The security (if any) that will be required.
- Powers to borrow.
- The special rules that apply to charging permanent endowment land and other charity property.
- The restrictions contained in sections 38 & 39 of the Charities Act 1993.
- Arrangement fees, interest rate and other costs associated with the loan.
- Different ways of structuring the loan facility for maximum benefit to the school.
Risk management is an important consideration. Governors and trustees are under a legal duty to identify major risks affecting the assets of a charity and to devise systems for minimising those risks. A major project funded by an all-monies loan that is fully secured on school property has the effect of transferring the bank's risk to the school. In those and similar circumstances charity trustees are expected to object specialist advice from a banking lawyer; this is part of their risk management duty.
Our Schools Banking team is regularly instructed to advise both schools and banks in relation to loan facilities and security.
Recent transactions have included:
- Acting in relation to a number of loans to independent schools including Bancroft's School, Bradfield College, Bristol Old Vic Theatre School, Clifton College, Cranleigh School and Warwick Independent Schools Foundation.
- Advising Allied Irish Bank on a number of loans to major independent schools - typical loan issues ranging from £2m-£7m.
- Advising a FTSE 250 property investment company on complex funding structures for the development of student accommodation across the UK.
- Acting for the University of the West of England on a £95m facility from Lloyds TSB to fund the development of student accommodation at the Frenchay campus site.
- Advising Bristol University on £50m working capital facilities from Barclays Bank including related interest rate swap agreements.
Please contact us for a discussion, without obligation, about current or prospective loan facilities of other aspects of the school's relationship with its bank.
