ICG unveils fixed-rate bond paying 7%
Investors starved of real returns have been thrown another lifeline in the form of Intermediate Capital Group's (ICG) corporate bond paying 7%.
The bond will pay a bi-annual coupon of 7% until it matures in December 2018. It is available to buy through stockbrokers or wealth managers.
It will be listed on the London Stock Exchange and will trade on its Order Book for Retail Bonds (ORB). There are now 151 bonds listed on the platform.
The bond offer will remain open until 16 December and will be issued on 21 December, and has a minimum investment of £2,000.
The ICG launch follows Tesco Bank, which unveiled an eight-year inflation-linked corporate bond on Wednesday, paying a coupon of 1% adjusted for changes in the Retail Prices Index (RPI).
Adrian Bell, head of debt advice and origination at Evolution Securities, which is acting as lead manager and distributor of the ICG bond, says the new bonds will appeal to existing shareholders of these companies and retail investors who see no other opportunities to protect their capital.
"Investors have the choice of opting for an index-linked bond or fixed-rate bond, both of which will protect your capitals and provide a real return," he says. "Not a single gilt can give investors that."
Bell adds that the double launch this week comes at a great time, commenting that the recent slew of bad news about the stock market will drive investors towards these products.
Bell hints at more competitive ICG bonds being issued next year, but admits that further deals "might not be as good".
This article was written for our sister website Money Observer
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
Replaced as the official measure of inflation by the consumer prices index (CPI) in December 2003. Both the Retail Price Index and CPI are attempts to estimate inflation in the UK, but they come up with different values because there are slight differences in what goods and services they cover, and how they are calculated. Unlike the CPI, the RPI includes a measure of housing costs, such as mortgage interest payments, council tax, house depreciation and buildings insurance, so changes in the interest rates affect the RPI. If interest rates are cut, it will reduce mortgage interest payments, so the RPI will fall but not the CPI. The RPI is sometimes referred to as the “headline” rate of inflation and the CPI as the “underlying” rate.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Corporate bonds are one of the main ways companies can raise money (the other is by issuing shares) by borrowing from the markets at a fixed rate of interest (the reason why they are also known as “fixed-interest securities”), which is called the “coupon”, paid twice yearly. But the nominal value of the bond – usually £100 – can fluctuate depending on the fortunes of the company and also the economy. However it will repay the original amount on maturity.