View the article online at http://citywire.co.uk/money/article/a615268
Retail bond market hots up with new 6.25% deal
Intermediate Capital Group (ICG) has launched a new retail bond offering investors a fixed annual rate of 6.25% until 2020.
Specialist lender ICG has launched a new retail bond paying a fixed annual rate of 6.25%.
The news comes as property investment company CLS reveals it has had to close its new retail bond issue seven days early because of oversubscription.
Terms and conditions
Intermediate Capital Group (ICG) will pay interest twice a year on 19 March and 19 September until the eight-year sterling bond matures in September 2020. The bond can also be held in an ISA (individual savings account) or Sipp (self-invested personal pension), where the return is tax-free.
Investors are required to make a minimum investment of £2,000, but can buy bonds in multiples of £100 thereafter. Once bought investors will be able to trade the bonds on the London Stock Exchange’s Order Book for Retail Bonds (ORB).
The deadline for retail investors is 12 September but the issue could be closed early – as we saw with CLS’s new bond – depending on demand.
This is the second retail bond launched by ICG. At the end of last year it offered investors the chance to earn 7% on a seven-year bond maturing in 2018.
Philip Keller, managing director and chief financial officer of ICG, said the first retail bond delivered a ‘positive performance’ and, given the company’s balance sheet, believes this bond provides ‘an excellent opportunity’ for retail investors.
ICG is looking to raise £50 million from the launch, but could take a little more, said Henrietta Podd of Canaccord Genuity, which has been appointed as lead manager of the bond.
A look at the risks
Investors should, however, bear in mind the risk associated with investing in ICG’s retail bond.
ICG specialises in arranging finance for medium-sized companies, providing direct loans and managing external funds. This is not without risk, and leaves the company very exposed in the event of a stock market crash. ICG also does the bulk of its business in the eurozone, so could be adversely affected if there were a break-up of the eurozone.
However, ICG has been in this business for over two decades, and they know their game, running a diversified portfolio with a strong focus on recovery of assets, said Mark Glowrey of Fixed Income Investor, which specialises in analysing bonds.
The bond is rated BBB- by credit rating agencies Standard & Poor's and Fitch – the investment grade above junk.
In the event that something does go wrong investors should remember that retail bonds are not covered by the Financial Services Compensation Scheme (FSCS).
The Citywire guide to investment trusts
In association with Aberdeen Asset Management
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by Gavin Lumsden on Mar 07, 2014 at 18:53