High-street bookmaker Ladbrokes (LAD) has launched new sterling retail bonds to complement its existing institutional bonds, previously issued in 2010. The latest offer has a due date of 2022 and offers a fixed interest rate of 5.125 per cent. The interest will be paid twice yearly, on 16 March and 16 September, and the bond is guaranteed by the company.
This is an opportunity for retail investors to gain access to Ladbrokes without having to buy shares. Chief financial officer Ian Bull confirmed any proceeds would be used to pay down existing short-term bank debt and help "diversify" Ladbrokes' existing debt model. An alternative equity fundraising was dismissed as changes to the group's current debt-to-equity mix were deemed "unnecessary". Mr Bull said he expected the bonds to achieve a "BB" stable rating from Standard & Poor's.
Mark Glowrey at Canaccord Genuity - one of the authorised brokers working with the bonds - said Ladbrokes would likely want to avoid the dilutive disadvantages associated with issuing new shares. Instead, he believes the new retail bonds represent the "ongoing maintenance" of Ladbrokes' existing debt pile and investors could take advantage of the lower-risk instrument now on offer.
Retail investors typically invest in bonds via Isas or Sipps, to be held anywhere between five to 10 years. The Ladbrokes bonds require a minimum initial subscription amount of £2,000 and are available in multiples of £100 thereafter. The offer period opened on 27 May 2014 and is expected to close at mid-day on 10 June 2014.
