investing in a bond

coachforlife

Helical bar plc is issuing 6% sterling fixed rate bonds does anyone know if this is a good idea to invest in as the rate are so low for us saves

opinions4u

You're making an unsecured loan to a property development company. There are big risks.

Linky to booklet

- no FSCS protection
- network of subsidiary companies, so if the parent goes bust and the subsidiaries survive you could still lose everything.
- your capital value will vary based on what the market thinks they're worth. There will be costs to trading.

Why can't they raise the money they want for less elsewhere?

I don't see the attraction.

C_Mababejive

I would never invest directly in bonds unless it were a mega company like National Grid. I would only generally invest via a high grade bond fund.

manzanilla

This is not like the "3 year bonds" that banks and building societies offer. If Helical Bar go bust, you won't get any money back. If you can't afford to lose the money or you like safe investments, stop reading now!

Why can't they raise the money they want for less elsewhere?

They can. They raised money yesterday at 4.4%, but that is a revolving facility out to 2017 see http://www.stockopedia.co.uk/share-prices/helical-bar-LON:HLCL/news/rns/130607hlcl5674g.htm/?title=new-75m-revolving-credit-facility. This bond issue will extend their borrowing maturity and so give them more security. This is a mid cap company that is not in dire straits.

I don't see the attraction.

The attraction is obviously the 6% interest they are offering. The bonds could be held in a Stocks & Shares ISA, so the 6% would be tax free.

Personally I wouldn't want a lot of my money invested here, but if you have no other property related equity investments AND it's only say 5% of your cash, then it's worth a look.

Masomnia

I think they're worth a look if you have a well diversified portfolio of other investments, and want to put a small chunk in to diversify further.

If you're talking about putting a good deal of your life savings in (rather than in the bank, to get a better rate) then I'd leave well alone. Too risky! It is something you'd do in addition to healthy savings in the bank, not instead of.

bigadaj

Interesting potential consequence of government policy though, particularly as funding for lending has had so much more of a negative effect on retail interest rates than near zero interest rates or quantitative easing.

The widespread misuse of the term bond also hasn't been helpful, the confusion between a guaranteed fixed rate and term guaranteed savings account and an almost speculative high interest loan to a high risk company with a real risk of 100% capital loss isn't evident to so many savers, who often aren't investors.

dunstonh

Banks and building societies should be banned from calling their fixed term deposits "bonds". It has created confusion for inexperienced investors who now think bonds are all the same thing. Bond is the most misused term going on savings/investments.

atush

If I were going to buy a bond direct, it would not b freom a small property company.

It would be from a large national company like Nat Grid as mentioned or maybe Tesco etc.

but I'd be far more likely to invest into collective equities.

Ark_Welder

dunstonh wrote: »

Banks and building societies should be banned from calling their fixed term deposits "bonds". It has created confusion for inexperienced investors who now think bonds are all the same thing. Bond is the most misused term going on savings/investments.

Even worse is the practice of calling recent issues by the Jockey Club and John Lewis, etc, retail bonds. Given that these cannot be traded and the 'coupon' is not always in the form of cash, there is even more of a chance that they will be confused with genuine corporate bonds that can be sold before maturity.

robtgossard

There is obviously a high risk involved in investing in the bond. With that being said, if your portfolio is diverse, there are chances you might be able to take the loss even if the company goes out of business. And if it doesn’t, enjoy the profit I would suggest you speak to your financial consultant and find out its feasibility for your portfolio.

jimjames

robtgossard wrote: »

There is obviously a high risk involved in investing in the bond. With that being said, if your portfolio is diverse, there are chances you might be able to take the loss even if the company goes out of business. And if it doesn’t, enjoy the profit I would suggest you speak to your financial consultant and find out its feasibility for your portfolio.

The fact that the OP refers to the situation of "rates so low for savers" would suggest that they have no other investments and seem to believe that this is a deposit type account rather than a facility where you could lose all your capital in a worst case scenario. Either way there is no FSCS protection as per a deposit account.