COUNCIL bosses will refinance a PFI debt incurred from building Blackburn Central High School and Witton Park High School in the hopes of saving cash.

The two schools were completed in 2012 and the associated PFI contract runs until 2036.

During this time, the council pays a monthly fee to the contractor, currently £553,930 per month, known as the unitary charge.

The unitary charge covers the financing and capital costs of the construction of the buildings, plus their maintenance costs until 2036, which includes the cost of future capital maintenance and ‘soft’ maintenance including caretaking and cleaning.

The construction of the buildings was financed by borrowing from banks, and the majority of the costs covered by the charge relate to the repayment and servicing of this debt.

The original debt on the scheme was approximately £50 million, of which about £41 million remains outstanding.

Although there would be an increase in the outstanding debt on the scheme, it is expected that the total value of the remaining repayments will be lower than those currently planned, due to the expected reduction in the interest rate charged on the new loan debt.

The precise value of this benefit will not be known until completion of the re-financing deal which is expected to be in mid-October, as this will be dependent on the financial markets at the precise time that the re-financing transaction is undertaken.

Executive member for finance and governance, Cllr Andy Kay, said: "It is not clear at which precise point and on what date the council will be required to enter into contractual arrangements to finalise any refinancing arrangement, however, it is hoped and expected that the refinancing transaction will be executed in mid-October, prior to Brexit.

"Refinancing opportunities generally exist where the market rate for the profit margin element falls below that currently charged by the incumbent senior funder.

"However, any refinancing exercise attracts significant early redemption penalties as well as legal and advisory fees.

"The reduction in margins must therefore be significant enough to offset these costs.

"It is common for this debt to be refinanced sometime after the completion of construction because the risks involved in the project generally reduce at this point which means that the initial loans can be replaced by loans at a lower rate of interest.

"The approach has been made at this time because of the historically low level of interest rates available at present."