Retail bonds are a new form of financial instrument that have been resorted to by cash strapped small and medium-sized companies as well as by the John Lewis Partnership. David Walker, partner at Memery Crystal, has advised on a number of the deals and he says that ‘The bond allows companies to connect with their client base or “following” and involve them in the development of their business.’
Retail bonds are a new form of financial instrument that have been resorted to by cash strapped small and medium-sized companies as well as by the John Lewis Partnership. David Walker, partner at Memery Crystal, has advised on a number of the deals and he says that ‘The bond allows companies to connect with their client base or “following” and involve them in the development of their business.’
Football clubs have particularly loyal followings and hence it is no surprise that some of them are looking at the idea. The interest rate on the bonds has been relatively high, around 7 per cent, but it can be paid in kind. Hotel Chocolat is paying its interest to bond holders in the form of boxes of chocolate. Football clubs are thinking of tapping their fan databases and offering discounted season tickets or merchandise as part of the coupon.
Since the bonds cannot change hands (there is no secondary market) issuers avoid legal, advisory and documentation costs. However, the fact they are not listed is potentially a downside. It makes them much less tax efficient from the viewpoint of sophisticated investors as they cannot be incorporated in a Sipp or an individual savings account. It is also possible that issuers of the bonds could default on them which may well be a bigger risk with a football club than, say, King of Shaves.