Retail bond launched paying 5.5%
Building merchanting company Grafton Group has launched a 5.5% retail bond with a duration of seven years.
The company is domiciled in Ireland but listed on the London Stock Exchange and is looking to raise around £50 million from the issue.
With savings rates continuing at all-time lows Lauren Charnley, stockbroker at Redmayne-Bentley, says the coupon of the bond may have additional appeal for investors. "Considering that a basic-rate tax payer needs to find a comparable rate of interest of 3.38% to beat inflation, Grafton's bond may prove to be an attractive alternative," she adds.
Grafton is a building materials group and is the umbrella brand for a range of companies, including building merchants Selco and Chadwicks and plumbing and heating supplies company Plumbase.
Grafton says it is issuing the retail bond to "diversify its key funding and access new sources of funds". In an announcement on its website it said: "The group is pleased to launch its first listed retail bond as part of its strategy of diversifying its sources of funding and extending the maturity profile of its debt".
The company turned over more than €2 billion (£1.7 billion) in the year to 31 December 2012, of which €75.2 million (£64 million) was profit. The current share price is €5.29 (£4.50).
The bond will mature 15 July 2020 and will pay interest bi-annually on 15 January and 15 July each year, with the first payment on 15 January 2014.
Minimum investment is £2,000 with additional investment in increments of £100.
The issue is expected to close 8 July 2013, subject to demand.
This article was written for our sister website Money Observer
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).