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Archive for December, 2014

Thursday 4 December 2014

Mini-bonds – an alternative funding solution

What are mini-bonds?

A ‘bond’ is a debt instrument under which an investor lends money to a borrower, usually a corporate entity. Bonds are issued by the borrower on specified terms which are contained in a ‘bond instrument’.

Traditional bonds are issued by companies to both private and institutional investors and are traded on a stock market. Such bonds are commonly known as ‘corporate bonds’ or ‘retail bonds’ (although unlisted bonds are also sometimes referred to as retail bonds) and are issued by a variety of companies, including well known brands such as Tesco, National Grid and GlaxoSmithKline.

There is no legal definition of a ‘mini-bond’. However, the term is generally used to describe bonds which are offered mainly to private individuals and which are not listed or traded on any stock market. Typically, mini-bonds are not redeemable prior to maturity and are non-transferable, so the investor is tied in for the term of the bond.

Mini-bonds, as opposed to corporate bonds, tend to be issued by much smaller companies. Mr and Mrs Smith, Hotel Chocolat, Ladbrokes and the University of Cambridge are examples of some more well-known companies and organisations which have issued mini-bonds to raise money.

Mini-bonds, like crowd-funding, have become an attractive method of raising capital for smaller companies as a result of the difficulties in securing bank finance over the last seven or eight years. As Capita Asset Services, a leading administrator of mini-bonds, says “Mini-bonds offer a number of other potential benefits to companies including brand building, increased company profile and customer loyalty.”The market has seen mini-bonds issued across a wide range of sectors including commercial real estate, confectionary, leisure and gambling, retail, food and beverage and education.

One of the main attractions of mini-bonds is the better interest rates they offer compared with the high street banks. Typically, mini-bonds will have a coupon of anywhere between five and 10 per cent., whereas current deposit rates offered by banks may be as low as one to two per cent.

If you would like to discuss how we can help you with your mini-bond and financial promotion, please contact us and we would be delighted to advise and support you:

Pure FS Support Limited
Katherine Norris
E: katherine@purefssupport.co.uk
T: 07977 274 628

Marriott Harrison LLP
Ben Devons
E: ben.devons@marriottharrison.co.uk
T: 020 7209 2000

Hugh Gardner
E: hugh.gardner@marriottharrison.co.uk
T: 020 7209 2000

Capita Asset Services
Ian Shaw
E: ian.shaw@capita.co.uk
T: 020 7954 9705

This article has been jointly written by Pure FS Support and Marriott Harrison LLP with contributions from Capita Asset Services. It has been written for information purposes only.

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