Hospital bosses are poised to take out an unsecured £27m loan from Blackpool Council.
It comes barely a year after councillors agreed to lend the local NHS £9.2m, using the multi-storey car park at Blackpool Victoria Hospital as surety.
If approved next week, the latest request from Blackpool Teaching Hospitals NHS Foundation Trust would see it able to borrow almost three times that amount. However no formal deal has yet been reached.
Council papers reveal the money would be used to cut the amount the trust spends paying off existing debt.
They add: “In the New Year the Council was once again approached by the Foundation Trust about a further loan for the purposes of restructuring an existing loan that had been taken out with the Foundation Trust Finance Facility back in 2009
“Unlike the previous loan this one would be unsecured as there are insufficient non-operational assets to secure against and the Foundation Trust is not legally allowed to secure against operational assets.”
However, it quotes Department of Health guidelines that says the loan would be ‘safeguarded’ under current regulations should the trust get into financial difficulty.
Because the council can borrow money at a lower rate than other organisations, it makes it possible to strike a deal that generates income for the authority while still representing a saving for Blackpool Teaching Hospitals.
Tim Bennett, director of finance and deputy chief executive at the trust, said ‘initial discussions’ had taken place around refinancing an existing loan.
He added: “Blackpool Council does have the ability to access loans at a much more favourable rate than our current terms and we are looking at the possibility of taking advantage of that opportunity which will lead to a saving for the Trust and provide funds to reinvest into patient care.
“Nothing has been formally agreed at this stage.”
While the interest rate for the proposed loan of up to £27.1m would not be finalised until any deal is completed, the trust said it expects to be able to save ‘up to £100,000 a year’.
In March 2009, the trust borrowed £25m over 25 years at a fixed interest rate of 3.7 per cent, which it is understood costs around £2.6m a year in repayments. The money was to help fund investment to ‘modernise and improve facilities and equipment’.
Coun Simon Blackburn, leader of Blackpool Council, said: “This proposal is to assist Blackpool Teaching Hospitals NHS Foundation Trust to restructure its debt which will in turn enable them to invest in front-line services.”
Blackpool Teaching Hospitals revealed last year that Government funding cuts forced it to make savings of around £21m.
Borrowing to boost resort
Blackpool Council has a Business Loans Fund that it uses to lend money to other organisations.
The fund was increased to £100m last year and takes advantage of the fact the council can borrow money at lower rates than other organisations.
So far, more than £60m has been lent or committed from the fund, including the £9.2m loan to Blackpool Teaching Hospitals last year.
This money was borrowed from the Public Works Loans Board in July at an interest rate of 1.48 per cent over 10 years.
Coun Simon Blackburn, leader of Blackpool Council, said: “As a council, we have the ability to borrow money at a lower interest rate than others, which can then be lent out to support companies to build, grow and hire.
“These loans will not only help companies to expand, but the repayments will help support our own budget and maintain our services.”