Property company launches 6% retail bond
A FTSE 250 company that specialises in buy-to-let mortgages has issued a retail bond with a 6% coupon.
The Paragon Group of Companies says it has made the issue, which matures in December 2020, for "general corporate purposes". It adds that the bond will "complement our already strong balance sheet, allow us to diversify our funding base and extend the tenor of our borrowings".
Paragon's primary business is as a "leading independent UK specialist buy-to-let lender", but it also deals in consumer loans and the buying and servicing of loan portfolios. The company has £9.6 billion of loan assets under management.
The secondary part of the business is in portfolio acquisitions, meaning the taking on of loan portfolios such as first and second mortgages and unsecured assets.
The bond will pay its coupon semi-annually on 5 March and 5 September each year. The minimum investment is £2,000, with additional purchases in increments of £100.
The company's shares have performed well since a dip in May, when they fell to a 52-week low of 150.5p, now sitting just below 300p. At the end of January it announced an increase in profits of 16.7% for the last quarter of 2012.
The loans it takes on are, according to Paragon, of an "exemplary" record. Arrears for the last quarter of 2012 were just 0.44%, compared with the average data from the Council of Mortgage Lenders of 1.51%.
Paragon says although it has no target, it expects to raise between £50 million and £75 million from the issue. The offer period is expected to close on 26 February.
This article was written for our sister website Money Observer
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.