Bruntwood Bond 2 plc 6% 2025

[stevensfo]

Anyone heard of this offer? I just got the email from AJBell. The forum of fixedincomeinvestor.co.uk doesn't seem to be showing, so no info. I have to say that 6% seems quite generous, so I assume there's a catch somewhere.

Steve

[Alaric]

I have to say that 6% seems quite generous, so I assume there's a catch somewhere.

You are relying on the ability of Bruntwood (who?) to service the bond. The extra 4% to 5% over what a UK Government Bond might pay is the market's or issuer's assessment of the extra risks. These aren't just the risk of suspension or default, but also marketability. If you wanted to sell in a hurry, how easy would it be to find a buyer at a sensible price?

[Gan020]

Effectively they are rolling over the existing bond which expires shortly. The existing bond pays 6% and this new one pays 6% but I cannot properly understand where the debt ranks.

I'll wait for someone with more expertise than me but it looks way down the list in terms of pay back in an insolvency and junior to the existing bonds security.

The current bond is £50m and this new one is £50m but it's pretty illiquid. Fine if you are in for say £10k but even then the MM will play games if things go wrong and they will stop making a market.

Having said all that the company has been around since 1979 from memory.

The burning question is why the coupon is 6%, because that's telling us something when compared with some of the headline rates the REITS are borrowing at. RLE are borrowing at 3.4%, SREI have just refinanced at 2.5% for 16 years. I suspect when I look closer I'm going to find the LTV is really high.

I would say without fully doing my research the coupon will reflect the risk (or may not given how everything fixed interest seems to be overbought in my mind)

[GoSeigen]

Anyone heard of this offer? I just got the email from AJBell. The forum of fixedincomeinvestor.co.uk doesn't seem to be showing, so no info. I have to say that 6% seems quite generous, so I assume there's a catch somewhere.

If you think 6.5% for a new bond from an unknown privately-owned company looks generous, then maybe check out WBS (West Bromwich Building Society PIBS). I've posted about them today:

https://www.lemonfool.co.uk/viewtopic.php?p=281378#p281378

If we assume it will take five years for the yield to drop and settle around 3.5% as above then current yield for WBS bought at today's prices is roughly 14%pa.



GS