The 'retail bond' sector was one of the success stories of 2011. With bank funding hard to come by, corporations are looking to raise capital directly from private investors. Last year alone, Lloyds TSB, RBS, Provident Financial, Tesco Bank, National Grid and Intermediate Capital Group all brought new issues to market. Demand has been strong for this re-emerging asset class, and the bulk of the new issues have gone on to trade at a premium, underpinned by a rising gilt market.
This year kicks off with another new retail issue from housing association Places for People. It raised £140m last year with a well-received five-year bond that went on to trade at a nine-point premium in the secondary market. The company has now returned to the market, this time with a 10-year index-linked issue - the Places for People 1% IL 2022.
The bond is structured in what has become the standard format for index-linked sterling issues. Copying the structure of the original index-linked gilts, both the coupon and the maturity proceeds are linked to the Retail Price Index (RPI). That means that the low 1 per cent coupon will gradually increase in line with retail price inflation, while the uplift on the redemption price will be more meaningful. As an example, a 5 per cent rate on inflation, running over the entire life of the bond would boost the redemption price to £163 for every £100 invested.
PLACES FOR PEOPLE 1% INDEX-LINKED (ISIN: XS0731910765: TIDM: PFP1) | |||
| Price: | 100p | Yield: | na |
| Maturity: | Jan-22 | Piece: | £100 |
| Coupon: | RPI + 1% | Credit rating: | Aa3 |
| Payment: | Semi-annual | Issue size: | £25m |
■ Subscription period - 12th to no later than 25th Jan
■ Settlement - 31st Jan 2012 (Crest/Euroclear)
■ Code - XS0731910765, TDIM PFP1
