Exclusive-Scottish government to sound out top investors for debut 'kilts' bond sale, sources say
Scottish Government Prepares for First 'Kilts' Bond Sale
By Yoruk Bahceli and Marc Jones
Investor Engagement and Market Preparation
LONDON, June 5 (Reuters) - The Scottish government is starting to sound out leading investors as it prepares the first sale of its own bonds, also known as 'kilts', three people familiar told Reuters.
A call with investors is scheduled for later on Friday, two of the sources said, a major engagement with the market ahead of a possible sale.
Planned Bond Issuance Timeline
Scotland, part of the United Kingdom, has said it plans to issue a new bond in the 2026-2027 financial year, which would be part of a 1.5 billion pound ($2 billion) programme. It has said any sale would come after last month's elections.
The Scottish government did not immediately respond to a request for comment and Reuters could not establish how soon Scotland would sell bonds.
Background and Credit Ratings
Devolved Powers and Bond Issuance History
The devolved Scottish government, which controls domestic policy areas including education, health and policing, has had the power to issue bonds since 2015, but has not used it before now.
Credit Ratings and 'Kilt' Bonds Terminology
Scotland was awarded AA and Aa3 credit rating from S&P Global and Moody's last year - the same as their respective UK ratings - a key step towards the sale of the so-called kilt bonds. The term is a play on gilts, as UK government bonds are known.
Investor Questions and Historical Context
Investor Inquiries and Market Sentiment
One of the sources cited an emailed invitation to a call from the Investment Association (IA) to some of its members, which was shared with Reuters. The IA declined to comment.
Another source, who said they would attend Friday's call, plans to ask what Scotland hopes to achieve with the bond sale and about possible pricing.
Another person said the main question would be how long the maturity - or final payback date - of the bonds would be, given that independence from the UK remains a key aim of Scotland's SNP government.
Historical Precedent: The Darien Scheme
The last time Scotland sought to raise funds independently of the UK was in the late 17th century, when a costly colonial expedition to modern-day Panama known as the Darien Scheme failed and effectively bankrupted the country.
It was an event that some historians argue was key in precipitating the Act of Union between Scotland and England in 1707.
Statements from Scottish Government Officials
First Minister's Remarks and Progress Updates
Scotland's First Minister, John Swinney, told financial services firms in London in January that the government was making "good progress" towards its first bond sale and had started the process of appointing banks and legal advisors, according to the Scottish government website.
Reporting Credits
(Reporting by Yoruk Bahceli, Marc Jones and Dhara Ranasinghe, additional reporting by Alistair Smout and David Milliken; Editing by Elisa Martinuzzi)
