Mr & Mrs Smith Launch 7.5% bond (4 years)

LDN>HK>LDN

A buddy of mine just sent me some bumf about Mr & Mrs Smith (the boutique hotel chain) offering a 4 year bond, paying 7.5%, see below the details:

http://www.mrandmrssmith.com/us/bond

Has anyone else got involved with this?

Pros? Cons?

Any advice welcome!

Starbrite

Not related in any way, but having looked at your link I checked out there hotels and in doing so found a Limo company to who can do a Airport transfer for my trip to Marbella next summer!

Thank you No idea about the bound though............

Brian_Bullocks

Unsecured debt and non-tradable, they go broke, you get nowt. Might as well put the money on black in a casino :money:

Robisere

[FONT=Arial, sans-serif]RED FLAGS everywhere in the PDF, Download and read. If it looks too good to be true ...[/FONT]

[FONT=Arial, sans-serif](from Page 2 of the PDF) -[/FONT]



[FONT=Arial, sans-serif]Smith Bonds are an unsecured debt of the Company and they may not be a suitable investment for all recipients of the Invitation.[/FONT]



[FONT=Arial, sans-serif]It will not be possible to sell or realise Smith Bonds before they mature or to obtain reliable information about the risks to which they are exposed … and there is no guarantee that the Company (or Spy Publishing Limited, as guarantor) will be able to repay them.[/FONT]



[FONT=Arial, sans-serif]This Invitation does not constitute an offer of transferable securities to the public and accordingly this Invitation does not constitute a prospectus to which the Prospectus Rules of the Financial Securities Authority apply.[/FONT]





[FONT=Arial, sans-serif]Therefore, this Invitation and the Instrument have not been approved by thye Financial Services Authority or any other regulatory body.[/FONT]

[FONT=Arial, sans-serif]Why, after reading this, would any sane, sensible person want to invest in something that has no financial safety net whatsoever? Part of the above, means that it will be impossible to obtain any form of restitution or compensation, should this hare-brained schemme go belly-up?[/FONT]

Masomnia

Higher return, but you are paying for that risk; they aren't covered by the FSCS.

If you are thinking about it, have a good look at the company and their business model, and whether you think the odds of them paying you back are worth the extra few % you'll get.

Reaper

Whenever I see a fixed income offering I compare them to my largest fixed income holding which is RSA Preference Shares.

RSA:
Yield at current prices 7.2% with no further tax to pay for basic rate tax payers. No end date.
Risks: Huge international insurance company that has been in existence in some form for 300 years. Little direct exposure to dodgy European countries though in the finance sector so perhaps a knock on effect in the event of a meltdown.

Mr & Mrs Smith:
Yield 7.5% and still income tax to pay on that (unless you can put it in an ISA/SIPP). Lasts 4 years.
Risks: A bond rather than a preference share (so higher up the pecking order if the company folds), but the company is little more than a web site. Has been going for 9 years. Holidays may well be cut back on if things get bad and competitors can easily enter the market.

Personally I would rate them as far more risky than RSA (others might not agree) and as such I would demand a much higher yield which is not on offer.

If you were already a regular customer of theirs the 9.5% to be used on holidays might make it more appealing, but if not the risk/reward level does not appeal to me.

oldvicar

I think I'd rather take a punt on Greek government bonds.

thenudeone

A corporate bond issued by a company is completely different to a "bond" account as marketed by a building society, say.

The latter comes with FSCS protection and banking regulations, codes of practice etc. to protect savers.

The former is a creditor of the company. If the company goes belly up, the bond holder may get nothing, so it's all about weighing the risk of that happening against the higher expected returns.

gadgetmind

I agree with others: not enough income given the high degree of risk and non-tradeable nature.

Why not do as Reaper suggested and look at bonds and preference shares for some major companies?

I hold some Nat West and Lloyds prefs that are paying over 10% pa and I think HMG have made it clear that they won't be letting those two go down.

Onawingandaprayer

Reaper wrote: »

RSA:
Yield at current prices 7.2% with no further tax to pay for basic rate tax payers. No end date.
Risks: Huge international insurance company that has been in existence in some form for 300 years. Little direct exposure to dodgy European countries though in the finance sector so perhaps a knock on effect in the event of a meltdown..

Not in any way disputing what you say about RSA, who are as sound as a pound - sorry, scrub that; bad analogy - but just wanted to share my experience of about 6 years back when my IFA recommended a fixed term annuity with AIG.

"AIG? Not very familiar with them" says I and Mrs Onawingandaprayer "Are they safe?"

"Only the world's largest insurance company" says he. "If they go down, we'll all be living in caves."

Seemed good enough for us, so we went with it.

Well, as history will tell us, they didn't go down, the week of the Lehman Brothers collapse, but only by a whisker, after the US Fed stepped in to shore them up. (Recall watching the Bloomberg Channel till the very small hours to see if they would be bailed. Happy days!)

gadgetmind

Onawingandaprayer wrote: »

Seemed good enough for us, so we went with it.

You mean you trusted a salesman?

Anyway, glad it all worked out. I have some banking and insurance shares and prefs, but I "share the love" rather than backing just one of them.