Scottish Mortgage raises another £188m of debt

Fiona McBain, chair of Scottish Mortgage

Baillie Gifford’s flagship £8.9 billion fund, the Scottish Mortgage Investment Trust plc, said on Thursday it raised a further £188 million in debt.

Scottish Mortgage is jointly managed by Baillie Gifford partners James Anderson and Tom Slater.

It is the UK’s largest conventional investment trust company, or closed end fund.

Scottish Mortgage chairman Fiona McBain said: “The board views the capacity to issue modest amounts of debt as one of the principal advantages of Scottish Mortgage’s investment trust structure. 

“I am delighted to say that that the company continues to be able to raise private placement debt at highly attractive long-term rates.

“This is reflective of the enduring strength of Scottish Mortgage’s proposition and should enhance the long-term returns for our shareholders.” 

Scottish Mortgage said total fair value of its loans and debentures amounted to £763.7 million as at December 31, 2019, and that “the potential gearing of the company was 8.4% of shareholders’ funds and the invested gearing level was 8.2% on the same basis.”

Scottish Mortgage said it raised the new £188 million in long-term, fixed rate, senior, unsecured private placement notes, denominated in a mixture of Sterling and Euros.

“This transaction has provided the company with further long-term financing at very attractive rates,” said Scottish Mortgage.

“These new notes are part of Scottish Mortgage’s existing gearing facilities.

“The board remains committed to the strategic use of borrowings for the company, in the belief that gearing the portfolio in this way will enhance returns to shareholders over the long term.

“As Scottish Mortgage’s assets have grown in recent years, the board has increased the absolute level of the borrowings in order to maintain the relative level of gearing of the portfolio.

“This is the third set of private placement notes issued by the company. 

“The new private placement agreement provides for total additional borrowings of £188 million, through the issuance of three notes: one 20-year note for £150 million with a fixed coupon of 2.30%, one 25-year note for EUR 18 million with a fixed coupon of 1.65% and a 30-year note for EUR 27 million with a fixed coupon of 1.77%.

“All coupons will be payable semi annually. The funding date for all three tranches was the 15 January 2020.

“Once again, Banco Santander S.A. London acted as the placement agent for the transaction.”

Edinburgh-based Baillie Gifford & Co employed 1,285 people as of December 31, 2019, and had assets under management and advice of £206 billion as of September 30, 2019.