Icap unveils fixed-rate bond paying 5.5%
FTSE 100-listed financial services broker Icap has launched a six-year retail bond paying 5.5%.
The corporate bond, which will pay the coupon twice-yearly on 31 July and 31 January, could also benefit from an uplift in interest rate of 1.25% boosting the coupon to 6.75% if the bond's credit rating drops significantly.
The bond is expected to be rated BBB+ by Fitch and Baa2 by Moody's, which puts it in the lowest bracket of investment grade.
It is understood that Icap wants to raise £50 million from the issue.
The bonds will be sold in £100 increments, and the minimum investment is £1,000. It will be available through stockbrokers and wealth managers.
Applications for the bond will close on 24 July, and it is expected to list on the London Stock Exchange's Order Book for Retail Bonds (ORB) on 31 July.
Lauren Charnley, stockbroker at Redmayne-Bentley, says the bond is likely to attract interest "given the stability of earnings and net profit Icap has demonstrated over recent years".
Investor demand for retail bonds shows no sign of abating. Earlier this week, healthcare property firm Primary Health Properties closed its retail bond issue five days early, after hitting its £75 million target.
Other recent retail bond issues include Severn Trent, which listed on the ORB this week after raising £75 million, and Tesco Bank, which unveiled its third retail bond in May.
This article was written for our sister website Money Observer
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
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.