Baillie Gifford’s Scottish Mortgage borrows $400m

Stewart Heggie

Scottish Mortgage Investment Trust plc, Baillie Gifford’s flagship fund, announced on Thursday it has raised a further $400 million of long-term borrowings.

In a new private placement, the company completed the issuance of three notes: one 30-year note for $175 million with a fixed coupon of 2.99%, one 35-year note for $110 million with a fixed coupon of 3.04% and a 40-year note for $115 million with a fixed coupon of 3.09%.

Scottish Mortgage shares soared in late 2021 to peak over £15 — but have since slipped to around £11.50 to give the fund a current stock market value of roughly £16.6 billion, making it Scotland’s second-biggest listed firm just below Perth-based SSE.

Scottish Mortgage shares rose about 3% on Thursday.

The closed-end fund — a FTSE 100 constituent — had total assets of more than £20 billion at December 31 and its biggest investment holdings included Moderna, ASML, Illumina, Tesla and Tencent.

Stewart Heggie, investment specialist for Scottish Mortgage, said: “At present, competition for capital in the Scottish Mortgage portfolio is intense.

“Raising fresh capital at this point will allow us to patiently back more transformational growth companies, as well as increasing stakes in companies who are making considerable progress operationally thus expanding the scale of their opportunities. 

“We possess no competitive advantage in trying to predict short-term market gyrations. 

“Therefore, no tactical attempt was made to capture recent market swings.”

The fund said in a stock exchange statement: “This transaction has provided the company with further long-term financing at very attractive rates.

As Scottish Mortgage’s assets have grown, the board has increased the absolute level of the borrowings for the company in order to maintain what it believes to be the appropriate level of gearing of the portfolio.

“In line with the gearing policy and guidance provided in the company’s Annual Report, the board remains committed to the strategic use of borrowings for the company in this way, with the aim of enhancing returns to shareholders over time, in line with Scottish Mortgage’s distinctive investment philosophy and disciplined long-term approach.”

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

Scottish Mortgage chair Fiona McBain said: “Once again the company has issued long-term private placement debt at attractive rates.

“This is reflective of the enduring strength of Scottish Mortgage’s proposition and should enhance shareholders’ returns over the coming decades.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.