Provident Financial 7% 2020 Corporate Bond

strawberrylane

I can only echo what purch has said above.

Whatever you decide, please don't just invest blindly.

There are plenty of risks associated with this investment in particular and with individual corporate bonds in general.

My advice for what it's worth would be to steer clear unless you understand what you are doing, and with the greatest respect it sounds as if many of the above posters do not understand enough.

As a bare minimum, please please download and read the offer prospectus which is available on the HL website. If it all looks like double dutch to you I would advise not to proceed.

As an aside, Provident offered a similar bond to the wholesale market at 8% late last year. That bond is currently yielding about 7.2% so this one is not unreasonably priced in my opinion. Provident are a FTSE 250 company and have a BBB+ credit rating. This bond is a senior unsecured obligation. The company is a doorstep money lender and has been quite successful in the past but margins going forward may well be adversely affected by the state of the economy, unemployment, etc. They are solely UK focused now having sold off their international (Polish) business.

andyroberts_2

I'm interested in this but have some questions.

Value is 1.00 at the minute. Will it rise and fall like a normal 'fund'. Does this mean I've more or less invested at each time or does the value not alter???

Can I sell this easily at any point?

I'm confused wtith H-L as well. This provides 7% income so if £1000 was invested I could expected to get £70 over the year but it's in two installments.

However their policy for income reinvestment is a minimum of £200 so would my 'income' sit there for years before auto reinvesting itself???

As it does not auto reinvest I guess I lose out on some compounding here then?

Just wondered if anyone could help to clarify?

Thanks
Andy.

StevieJ

Lokolo wrote: »

Also I don't know how secure Provident are! Could lose it allllll.

Are Provident major sub-prime lenders?

purch

Value is 1.00 at the minute

No, it's not been issued yet.

The price is unlikely to be Par at issue.

Can I sell this easily at any point?

Hopefully. It will be available on the LSE retail platform, but liquidity in Corporate Bonds can vary. The spread on an issue with this kind of rating for that maturity will be in the region of 1.5-2%

Will it rise and fall like a normal 'fund'

A fund is a collective investment made up of often 100's of securities.

This is one individual security. It will not fluctuate in price anything like a Fund. Movements are likely to be far more 'dramatic'

I'm confused wtith H-L as well

I'm not confused........but I am disgusted with HL.

They appear to be 'pimping' this issue in the same way that they push their favourite Funds and Fund Managers.

It's clear that many of their target audience do not fully understand what this security is, and how it works.

Shame on HL.

RayWolfe

purch wrote: »

It's clear that many of their target audience do not fully understand what this security is, and how it works.
Shame on HL.

Well said! They are getting worse.
It's not as if they need to do this, their profits are good but if they carry on their reputation will deteriorate. I thought their strength was as an INEPENDENT Financial Advisor. Now, as you say, they are pimping; particularly on new issues. Not just offering them activly but promoting them.

stphnstevey

I have do admit, I haven't had time to delve deeper yet and of course would do before even dreaming to invest.

Is this a fixed rate of return - ie 7%? or does this vary with the bond price (like a fund or share)?

There seems to be a garantee of at least a return of at least your minimum investment - is this not the case?

DiggerUK

wholejobs,
I can only give you the same advice I gave stphnstevey.
http://forums.moneysavingexpert.com/showpost.html?p=31186043&postcount=4

aspiration_2

purch wrote: »

........
........

There are far safer/smarter ways to dip your toes into the 'murky' world of Fixed Income.

Hi purch

Another person here would like you to kindly elaborate with examples.

Thanks

Lokolo

Funds (Corp Bond, High Yield etc.)

http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?companyid=&tab=prices&sectorid=150&tab=prices&x=6&y=8

purch

Another person here would like you to kindly elaborate with examples

From the same part of the curve...

Tesco 5.5% 13th Dec 2019
BT 8.625% 26th March 2020

both better rated that this piece of paper.

There are literally hundreds of Bonds on issue, not all accessable in small amounts to retail investors, but all tradable in £10k amounts.

What worries me is that suddenly this company (H&L) is pushing a single Corporate Bond, that purely by coincidence they are the brokers for the issue.

They have never to my knowledge 'recommended' a single Corporate Bond for Investment to their customers, but now they are just pushing this one particular issue.

And it is quite obvious my the interest shown in this security on this forum that there will be thousands of people who know absolutely nothing about trading in fixed interest securities who will invest.

There are many people ( it appears) who have no knowledge of these securities, and no experience of them, and who have never had any interest whatsoever in directly investing in them, who now are being enticed into buying a sub-investment grade Bond.

That will mean that the issue price is higher than it would otherwise be, meaning that Provident Financial are able to get the issue away at a higher price and subsequently lower yield to themselves.

The winners will be Provident Financial who will be able to borrow money at a lower cost than their credit rating deserves.

I wonder why H&L are pushing this issue so strongly.

There can't be anything in it for them can there :eek: