Workspace Group unveils retail bond paying 6%
FTSE 250 property company Workspace Group has launched a seven-year corporate bond paying 6% interest to private investors.
The bond will pay a fixed rate of interest of 6% per year, payable in April and October each year. It will mature on 9 October 2019. The retail bond has a minimum investment of £2,000 and investors can buy further bonds in for £100 each.
The offer period opens today (19 September) and is expected to close on 2 October. However it may close early due to high demand.
This is the first retail bond that Workspace has launched. Jamie Hopkins, chief executive officer at Workspace Group, comments: "Workspace is seeking to diversify its sources of funding and we believe that a retail bond offers an opportunity for the company to achieve this."
Graham Clemett, group finance officer at Workspace Group, adds: "We've seen a good reception from other issuers in the market. It's an opportune time for us to launch a retail bond. It's simply a different source of finance to us getting a bank loan; however, bank finance is not necessarily available at this longer maturity of seven years."
Clemett says although there isn't a specific amount that the firm would like to raise through the retail bond, he would be very happy with £50 to £75 million. The money will be used to repay existing debt.
The bond is expected to be listed on the LSE and admitted to trading through the exchange's Order Book for Retail Bonds (ORB).
During the life of the bond investors will be able to buy and sell the bonds on the ORB.
Clemett adds: "Launching a retail bond is an attractive route for smaller companies. It aligns us with retail investors and helps extend our brand too. The ORB has been key in opening up the retail bond market."
Founded in 1987, Workspace owns and manages more than 100 London properties, which are home to around 4,000 businesses.
As at 31 August 2012, the firm had a market capitalisation of approximately £373 million.
Mike McCudden, head of derivatives at Interactive Investor, our sister website, comments on the launch: "This is a business that clearly understands their space in the market, doesn't take on undue risk and has a robust model which has seen it navigate successfully through the ups and downs of a tough market in recent years."
This article was written for our sister website Money Observer
A way of valuing a company by the total value of its issued shares and calculated by multiplying the number of shares in issues by the market price. This means the market capitalisation fluctuates continually as the value of the shares change in the market. For example, HSBC has 17.82bn shares in issue at a price of 646.2p making a market capitalisation of £115.15bn.
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.