£7bn Scottish Mortgage fund raises £170m of debt

Fiona McBain

Baillie Gifford’s flagship £7 billion fund, the Scottish Mortgage Investment Trust plc, said it has raised further borrowings of £170 million “to invest in additional future growth for shareholders …”

Scottish Mortgage chairman Fiona McBain said: “The company’s track record of strong performance has delivered growth that gives scope for additional borrowings at competitive rates.

“The board believes that this in turn creates opportunities to invest in additional future growth for shareholders over the long term, and reflects one of the principal advantages of the investment trust structure.”

In a stock exchange statement, the closed-end fund said: “Scottish Mortgage Investment Trust plc announces that it has raised a further £170 million in long term, fixed rate, senior, unsecured private placement notes, denominated in sterling.  

“This transaction has provided the company with further long term financing at a cost of just under 3% per annum.

“The new notes will form part of Scottish Mortgage’s gearing facilities.

 “As Scottish Mortgage’s assets have grown in recent years, the relative level of the gearing in the portfolio has consequently fallen.

“The board believes that, given the future long term investment opportunities available for Scottish Mortgage, a modest level of structural gearing in the portfolio remains appropriate.

“The board has therefore chosen to borrow further funds at these attractive long term rates in order to raise the gearing level again.

The new private placement agreement provides for total borrowings of £170 million, with a funding date of 4 June 2018, through the issuance of three notes: one 20 year note for £30 million with a fixed coupon of 2.91%, one 23 year note for £50 million with a fixed coupon of 2.94% and a 30 year note for £90 million with a fixed coupon of 2.96%.

“All coupons will be payable semi annually.

“These notes are in addition to the private placement notes issued in April 2017, detailed in the 2018 Annual Report and Financial Statements.

Once again, Santander UK plc acted as the placement agent for the transaction.”