Exclusive-Scottish government sounds out top investors for debut 'kilts' bond sale, sources say
By Marc Jones, Yoruk Bahceli and Dhara Ranasinghe
Scottish Government Prepares for Historic Bond Launch
LONDON, June 5 (Reuters) - The Scottish government is starting to sound out leading investors as it prepares its debut bond sale - the nation's first debt since the 17th century - three people familiar with the plans have told Reuters.
Investor Engagement and Bond Details
A call with investors about the bonds, nicknamed "kilts" in a play on the "gilts" name given to UK debt, is scheduled for Friday, two of the sources said.
It follows last month's re-election of the Scottish National Party, which has said it plans to sell £1.5 billion ($2 billion) worth of kilts over the coming years to help fund its infrastructure plans, from roads and railways to renewable energy projects.
Government Statements and Timeline
The Scottish government said in a response to questions from Reuters that its preparations for the bond launch "included meeting representative industry bodies and their members to inform the development of our plans."
It did not elaborate on how soon it might sell bonds, although the country's deputy first minister has said previously that the aim was for later this year or in early 2027.
A spokesperson added that the process of appointing bankers and legal advisers to oversee the issuance was expected to conclude shortly.
Key Questions and Market Reactions
Momentum and Credit Ratings
KEY QUESTIONS
Momentum towards the first 'kilts' issue has been steadily building in Scotland.
It was awarded AA and Aa3 credit ratings from S&P Global and Moody's last year - the same as their respective UK ratings - although S&P's came with a warning it was likely to be cut if Edinburgh took "material steps" towards independence from the UK - one of the SNP's main aims.
Investor Concerns and Expectations
Two of the sources said Friday's investor call had been arranged by the Investment Association, a trade association for UK money managers. The IA declined to comment.
One source, who said they would attend the call, said they planned to ask what the Scottish government hoped to achieve with the bond sale and about possible pricing.
Another said their main question would be how long the maturity - or final payback date - of the bonds would be, given that independence remained a key SNP aim.
Expert Opinions
Aaron Rock, head of rates at Aberdeen Investments, said he thought the bonds would be well received "in principle" when they happen.
He also flagged the "independence optionality" - the risk of another vote to split away from the UK - as "an additional layer of uncertainty over the life of the bond."
Historical Context and Significance
The devolved Scottish government, which controls domestic spending including on education, health and policing, has had the power to issue bonds since 2015, but has not used it before now.
The nation last sought to raise funds independently of the UK 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.
Impact on Scottish History
It was an event that some historians argue was key in precipitating the Act of Union between Scotland and England in 1707.
(Reporting by Yoruk Bahceli, Marc Jones and Dhara Ranasinghe; Additional reporting by Alistair Smout and David Milliken; Editing by Elisa Martinuzzi and Andrea Ricci)
