St Modwen Properties unveils 6.25% bond
FTSE 250 firm St Modwen Properties has launched a seven-year retail bond paying 6.25%.
The bond will pay a fixed rate of interest of 6.25% every year, payable twice yearly in May and November. The bond will mature on 7 November 2019.
St Modwen invests in UK property. Its £1.1 billion portfolio is split into income-producing investments, residential land and commercial land and development.
The company claims that it has a 25-year track record of adding value to its landbank by managing schemes through the planning process, remediating contaminated land and active asset management. The retail bond is the first one the company has issued.
Bill Oliver, chief executive at St Modwen Properties, comments: "With significant headroom on our existing debt facilities, the retail bond will provide St Modwen with more diversity in its funding sources, without increasing our gearing."
The offer period for the bond opened on 17 October and is expected to close at noon on 31 October. Once it is listed on the London Stock Exchange's Order Book for Retail Bonds, investors will be able to buy and sell the bond during market hours through a stockbroker.
The bond has a minimum initial subscription amount of £2,000 and in multiples of £100 thereafter.
This article was written for our sister website Money Observer
Investors who borrow money they use for investment and use the securities they buy as collateral for the loan are said to be “gearing up” the portfolio (in the US, gearing is referred to as “leveraging”) and widely used by investment trusts. The greater the gearing as a proportion of the overall portfolio, the greater the potential for profit or loss. If markets rise in value, the investor can pay back the loan and retain the profit but if markets fall, the investor may not be able to cover the borrowing and interest costs, and will make a loss. Also used to describe the ratio of a company’s borrowing in relation to its market capitalisation and the gearing ratio measures the extent to which a company is funded by debt. A company with high gearing is more vulnerable to downturns in the business cycle because the company must continue to service its debt regardless of how bad sales are.