Council to act as guarantor under plan by a private-sector consortium to make up 拢35m funding gap

One of Britain鈥檚 largest pension funds is set to be asked to help fund the construction of Glasgow鈥檚 2014 Commonwealth Games Village after the city council approved the plan.

As 黑洞社区 reported on Wednesday, the private sector consortium involved in the development has raised only 拢5m of its expected 拢40m contribution to the development after failing to agree loan terms with the Royal Bank of Scotland (RBS).

At a meeting yesterday morning, the council鈥檚 executive committee agreed to act as guarantor for the application by the City Legacy Limited (CL) consortium for 拢35m from Strathclyde Pension Fund, which is administered by the council.

A spokesman for the council told 黑洞社区: 鈥淭he council will support City Legacy鈥檚 application to Strathclyde Pension Fund for cash flow funding, an option the consortium is considering.

鈥淭he council views the provision of the guarantee as a minimal risk. The Athletes鈥� Village will provide a fantastic home for athletes and officials during the Glasgow 2014 Commonwealth Games, and then become a new neighbourhood for the city.鈥�

Council papers seen by 黑洞社区 showed that CL 鈥� which is made up of MacTaggart & Mickel Homes, Cruden Investments, CCG and WH Malcolm 鈥� was unable to reach agreement with RBS for the loan.

鈥淐L and RBS have been unable to reach agreement to date on the detailed terms of the loan, in particular with regard to the level and type of corporate guarantees that RBS is asking each individual consortium member to provide,鈥� the document said.

鈥淭he type of guarantee being sought by the bank is a 鈥榗ash-call鈥� guarantee which can be triggered by a number of unrelated default events within the individual members of the consortium not specific to the games development.

鈥淭his type of guarantee鈥laces a level of financial risk on the individual partners within the consortium that they cannot accept.鈥�

The document also pointed to the 鈥渢ightening鈥� of bank lending terms and availability since the development agreement was signed between the council and CL in April 2010.

Under the terms of the proposed deal with the pension fund, CL would be required to pay all costs of arranging it and would also pay the council around 拢2m for a refinancing charge.

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