Lender IPF aims to raise £50m by turning to private investors

The Leeds-based company is looking to raise £50m from the launch, which will allow individuals to invest a minimum of £2,000.

Investors will get an annual return of 6.125 per cent.

IPF’s move follows in the footsteps of former sister company Bradford-based Provident Financial and retailer Tesco, which have also turned to the retail market to diversify their finances.

IPF’s chief executive Gerard Ryan said the retail bond will give people who know the business a chance to invest in its future.

“A six per cent coupon is quite decent and the bond will carry a rating of BB+ that’s the same as our corporate rating. It will rank on a par with other funders,” he said.

He envisages strong take-up of the bond with people investing from £2,000 to hundreds of thousands.

The bond will mature in May 2020, which gives investors well over the five-year period needed for ISAs.

Retail bonds are proving increasingly popular with investors who want a safe haven for their money with much better interest rates than traditional banks.

Mr Ryan said the bond will provide a further funding arm. At the moment the group has a £480m debt facility, consisting of £230m in bank debt and £250m in existing bonds. The existing large bond was issued in 2010.

“The market has improved since then and there is a better understanding of what we do,” said Mr Ryan.

The £50m from the retail bond will be used to pay down the group’s bank debt.

There will be a number of authorised issuers including Killik & Co, Collins Stewart and Redmayne Bentley.

Daniel Aitkenhead, head of communications at Killik & Co, said retail bonds appeal to people who want the certainty of income.

He said that shorter terms such as seven years rather than the traditional 20 years also appeal to investors.

“You know an individual bond will come to fruition and people can tie in with paying school fees or their retirement. With five years left you can do an ISA totally tax free,” he said.

He added that there is no typical average spend on retail bonds with people paying anything from £200 to £100,000 upwards.

The target audience is aged 35 and over and generally tend to be people who haven’t inherited money but are trying to create their own.

Paul Killik, senior partner at Killik & Co, said: “Unsurprisingly, given the current low interest rate environment and the demographic trend towards an ageing population, corporate bonds are an important asset class to consider as part of a diversified investment portfolio for those seeking a reliable income stream, without the higher volatility typically associated with some other asset classes, such as equities.”

He added that the benefit of a retail bond over a bond fund is that they have a defined maturity date.

In addition, an investor in a bond fund is reliant on the market price when they exit the investment, whereas an investor in individual corporate bonds can choose to hold the bonds to maturity.

“The opening up of the retail bond market is significant in that it is bringing together private investors earning derisory interest on cash with those UK businesses requiring access to new, diversified source of capital in order to operate and flourish at a time when banks are reluctant to lend,” he added.

IPF has 2.4 million customers in six countries: Poland, the Czech Republic, Slovakia, Hungary, Mexico and Romania.

It is a FTSE 250 company with a market capitalisation of over £1bn.

It lends small sum, short-term unsecured loans through 28,500 agents and has 2.4 million customers.

Full year results announced last month showed revenues increased by nine per cent and the company reported a 20 per cent rise in pre-tax profits to £95m.

The company plans to accelerate growth through the development of adjacent markets, notably Bulgaria and Lithuania, which will be launched over the coming year.

The interest on the bonds at a fixed rate of 6.125 per cent a year will be paid twice a year in equal instalments.

Bondholders will be able to sell their bonds during normal trading hours on the open market through their stockbroker. Canaccord Genuity Limited is acting as manager on the issue.

The bonds have a minimum initial subscription amount of £2,000 and are available in multiples of £100 thereafter.

The offer period is now open and is expected to close at noon on April 30.

The bonds are expected to be listed on the UK Listing Authority’s Official List.

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