Unite Group 6.125% 2020

calypso_rhapsody

I'd be interested in any views on this new bond issue ... am slightly tempted but have not yet read all the paperwork!!

marathon_man_3

No guarantees as to safety of your funds thus I personally wouldn't be tempted despite the fact that you can trade in the bonds and the decent rate (in today's low-interest environment, that is) being offered.

Many will be tempted but it wouldn't be for me.

Linton

Worth looking at as part of a larger portfolio - say 15%.

sabretoothtigger

I dont know the company I dont have to, I know the currency and you dont want to be receiving 6% in 2020 when large parts of the QE is expiring and you are stuck with a rate set when QE was at its peak of suppressing fair interest available

These things are for traders not investors. Get a fund instead or track something adjustable to the circumstances. I dont advise putting a stake in the ground and hoping you dont get trampled

Linton

sabretoothtigger wrote: »

I dont know the company I dont have to, I know the currency and you dont want to be receiving 6% in 2020 when large parts of the QE is expiring and you are stuck with a rate set when QE was at its peak of suppressing fair interest available

These things are for traders not investors. Get a fund instead or track something adjustable to the circumstances. I dont advise putting a stake in the ground and hoping you dont get trampled

The bond matures in 2020 and you get your money back, provided the company hasnt gone bust in the meantime.

roundabouthere

They shut down their loss making modular factory recently.

Overall they are concerned with student accommodation which has seen a massive expansion in the last few years. Universities are rapidly overhauling their accommodation to offer value for money for charging their large tuition fees. To cater for them once into their second and third years unite have been providing clean accommodation for them in major university towns/cities. Whether this trend continues depends on how many people decide to keep going to uni. A change in government or government policy could again lead to a large drop in uni numbers which could hit their expansion plans hard.

grey_gym_sock

http://www.fixedincomeinvestor.co.uk/x/analysis.html?type=bond-of-the-week&cat=analysis-comment&y=2012&aid=859 is quite a positive view of it.

it says unite's expansion plans are now more modest - which is better for bond-holders.

big falls in student numbers would be a problem. stable numbers of UK students, plus growth in international students, would be OK.

property asset backing is generally useful (especially with a lot of it in london).

it's arguably a short enough term (7.5 years) to minimize the risk of interest rates and inflation really taking off before it's redeemed.

maybe.

if you want to buy sterling bonds, that is. equities look far more attractive to me. but there has to be a case for a bit of both.

calypso_rhapsody

Thanks everyone for your thoughts - would only be looking to put a tiny part of my portfolio into it (<1%) as part of a pretty well balanced portfolio .... have now read the paperwork i have and will take a look at the link that grey gym sock posted but think i may dip my toe ...

mulronie

I'm often wary about these.

Why would a company go to the expense and hassle of creating and listing an exchange-traded instrument to raise funding? I would see that as a sign that they approached the usual commercial lenders (Barclays, Lloyds, HSBC, et al) for a term loan and were declined.

If the credit controllers at the big banks aren't prepared to lend at 6.125% (when they can borrow from savers for next to nothing)... why would I?

Wobblydeb

I have applied for a chunk. Covers several gaps in my portfolio (property, higher education and fixed income). I understand and like the sector, and there are few opportunities to invest in it. The HE sector is due some consolidation after a lengthy boom, but I anticipate this will come at the expense of underperforming universities rather than a global decline. Besides, if the sector suffers substantially, this is of course an asset backed lend and the buildings can be put to other uses.

Wobblydeb

mulronie wrote: »

I'm often wary about these.

Why would a company go to the expense and hassle of creating and listing an exchange-traded instrument to raise funding? I would see that as a sign that they approached the usual commercial lenders (Barclays, Lloyds, HSBC, et al) for a term loan and were declined.

If the credit controllers at the big banks aren't prepared to lend at 6.125% (when they can borrow from savers for next to nothing)... why would I?

You make a good point, and I've been having a look at this.

The main reason would seem to be to expand the lending base, which is entirely understandable. It has been a tough borrowing environment since 2007 and being reliant on a couple of lenders would be foolhardy in the extreme.

The last lending round (£121m from L&G in May 2012) was finalised at 5.05% which yes, is cheaper than the bond on offer. I don't know how the various fees work out for each option. (There can be quite hefty upfront fees on corporate debt).

The debt they are replacing seems to be substantially more expensive, particularly after you take hedging requirements into account.