Scottish Mortgage Investment Trust raises further borrowings of £170m

Scottish Mortgage Investment Trust has announced that it has raised a further £170 million in long-term, fixed rate, senior, unsecured private placement notes, denominated in sterling.

The transaction has provided the £7.3bn turst with further long-term financing at a cost of just under 3 per cent per annum.

In an announcement this morning, the trust said the new notes will form part of Scottish Mortgage’s gearing facilities.

As Scottish Mortgage’s assets have grown in recent years, the relative level of the gearing in the portfolio has consequently fallen.

The FTSE 100-listed investment trust achieved a 25 per cent total return on net assets in the year to 31 March, with shareholders receiving 21.6 per cent, smashing the 2.9 per cent gain in its benchmark, the FTSE All-World index.

The board of the trust, which is managed by Baillie Gifford’s James Anderson and Tom Slater, said it believes that, given the future long-term investment opportunities available for Scottish Mortgage, a modest level of structural gearing in the portfolio remains appropriate. The Board has therefore chosen to borrow further funds at these attractive long-term rates in order to raise the gearing level again.

The new private placement agreement provides for total borrowings of £170 million, with a funding date of 4 June 2018, through the issuance of three notes: one 20 year note for £30 million with a fixed coupon of 2.91 per cent, one 23 year note for £50 million with a fixed coupon of 2.94 per cent and a 30 year note for £90 million with a fixed coupon of 2.96 per cent. All coupons will be payable semi annually. These notes are in addition to the private placement notes issued in April 2017, detailed in the 2018 Annual Report and Financial Statements.

Fiona McBain, Chairman of Scottish Mortgage, said: “The Company’s track record of strong performance has delivered growth that gives scope for additional borrowings at competitive rates. The Board believes that this in turn creates opportunities to invest in additional future growth for shareholders over the long term, and reflects one of the principal advantages of the investment trust structure.”

Santander UK acted as the placement agent for the transaction.