500 million Secured Note Program listed on the Irish Stock Exchange. Frequently Asked Questions

Transcription

1 500 million Secured Note Program listed on the Irish Stock Exchange Frequently Asked Questions

2 Introduction to Corporate Finance Bonds Ltd As the name suggests, Corporate Finance Bonds provides corporate finance to help UK companies create, acquire, develop or grow their business. Corporate Finance Bonds achieves this from the issue of Bonds and then using the capital raised to lend money to such businesses on a secured basis. This business model is akin to that of a bank which uses the cash it raises from the market to lend onward to its customers, thereby making a profit on the difference between the cost of borrowing as an institution and the rate it lends at. Corporate Finance Bonds has issued a 500m secured note programme to fund this activity. Notes are issued in Series with a coupon in the range of 6% to 8% and so in the current low interest rate environment offer an exceptionally attractive opportunity for professional investors to secure high yield with underlying asset security. The programme is wholesale and can be accessed by professional advisers, and institutions with a denomination of 1 or high net worth investors investing a minimum of 100,000. It is approved by and listed on the Global Exchange Market of the Irish Stock Exchange and is enabled through CREST, Euroclear and Clearstream. The programme is asset backed, with loans made to a variety of businesses secured with a registered debenture and/or other physical security or personal guarantees when prudent. To protect each bond holder the maximum loan to any one borrower is 20% of the Note proceeds, thus ensuring that lending is well diversified. The operating costs of the Secured Note Programme are funded by an interest rate differential between the coupon paid to investors and the interest rate charged to borrowers and from arrangement fees. These costs cover the underwriting of loan applications, involving corporate due diligence, analysis of business plans and evaluation of relevant business sectors, sensitivity analysis on financial projections and potential for re-financing. Distribution support is secured by virtue of the Programme enjoying the following key benefits as a mainstream asset for regulatory purposes: Listed on a recognised HMRC approved exchange Enabled for electronic clearing through CREST, Euroclear and Clearstream Liquidity provided by secondary market managed by a panel of international stockbrokers Valuations through Bloomberg and Financial Express Diversification with a minimum of five assets held in each bond issuance Corporate Finance Bonds is a partner company within the SA Group

3 About Corporate Finance Corporate Finance Bonds provides capital to businesses through structuring debt to aid the refinancing and restructuring of the business. This often involves raising capital for project finance, asset backed lending, real estate developments, corporate acquisitions and mergers and working capital. Corporate Finance Bonds raises, through its Secured Note Programme, capital from investors for this purpose. BACKGROUND TO BONDS What is a bond and how does it work? A bond is a lump sum invested in a stock issued by a company usually for a fixed term at a fixed interest rate. At the end of the term, known as the redemption date, the original value is repaid in full. Before the redemption date, the bond can be bought and sold at any time at the market price. What is a bond yield? The bond yield tells investors what the return on their investment is, and can be calculated based on the current price of the bond in the market. For example, if a GBP 100 bond is paying 4% fixed interest, in other words, GBP 4 per year, and the bond can be bought for GBP 100, then the bond yield is 4%; if this bond price now falls to GBP 90, then the yield is now 4/90 or approximately 4.4%. In this way, the bond yield increases as the price falls since investors receive a fixed amount each year regardless of the bond price. ABOUT THE ARRANGER AND ISSUER OF THESE BONDS Each Series of bonds is issued as part of a 500m secured note programme listed by a UK private limited company, with no assets or liabilities. The programme and each Series is listed on the Global Exchange Market of the Irish Stock Exchange. Each issue is segregated and secured against the assets relevant to each issue. This protects investors in each Series. Corporate Finance Bonds enjoys the considerable commercial benefits and distribution resources of the SA Group, with whom it is formally associated as a partner business. Who is the Adviser to Corporate Finance Bonds Ltd? The corporate adviser to the issuer is Specialist Advisors Limited. Advice is provided on the Offer terms for the issue with reference to the level and frequency of coupon payable, redemption date, financial terms and to set the Investment Mandate for the types of underlying assets that can be held. This Mandate will set out the types of asset that can be held by defining the acceptable range of legal structures (such as loan note, debenture, preference share) business sector and geography, return expectations from underlying securities held etc. Specialist Advisors Limited is an international business based in the United Kingdom, Europe, Middle East and Caribbean, with a wide range of strategic relationships within the professional advisory and consultancy markets, including investment management, stock broking, property development, asset backed lending, the legal and accountancy professions, trading and dealing platforms and associated technology, trading and financial services. Specialist Advisors is also part of the SA Group. The registered office of Specialist Advisors Ltd is 53 Davies Street, London W1K 5JH. 3

4 How big is this bond programme? The issue size for the programme is GBP 500 million. These Notes have been trading successfully since February 2015 and have paid all coupons to date on time and in full. MAIN FEATURES OF THESE BONDS How will these bonds fit into my portfolio? The bonds generate a fixed income without capital appreciation. Typically the underlying assets have a low correlation to the equities market. The bonds are sometimes referred to as high yield bonds and are also considered by investment experts to also have a low correlation to other fixed interest markets such as gilts. As such, the bonds would typically be considered as forming part of the fixed income segment of an investor s portfolio as they offer low volatility, diversification, non-correlation and attractive yields. How are the bonds regulated? The bonds themselves are held and traded on the Global Exchange Market of the Irish Stock Exchange, an HMRC recognised exchange. What are the risks of investing in these bonds? You should look at the specific terms of each Series issued under the bond programme for full details. The bonds are designed to take a priority position in a business ranking higher than equity holders and security is usually taken with a fixed or floating charge so the position of the bond holders is of a preferred creditor. Substantive due diligence and risk assessment is undertaken into each company investment, including an analysis of financial statements, business credentials and experience, alignment of investor and management interests, shareholding structure and corporate governance process, and industry or sector specific risk factors. This is undertaken to minimise the risk of default of underlying investments of the bonds. Risk is also mitigated by spreading underlying bond investments. Who will manage these bonds? The legal obligations of the bonds are managed by the Issuer in conjunction with any Specialist Asset Advisor appointed. The Collateral Manager for the bond is Structural Advisors Ltd. The registered office of Structural Advisors Ltd is 37th Floor, 1 Canada Square, Canary Wharf, London E14 5AA. The Legal Advisers to the Programme are specialist London law firm GRM Law, which provides international advice to the investment industry. GRM provides all legal documentation for the programme and individual issues, liaising with the Irish Stock Exchange on securing listing. It should be noted that GRM has no knowledge of nor input to the specific investment policy and lending/ collaterisation process pursued by CFBL and as such does not in any way endorse the Programme or any Offer under it. Who will conduct the valuations of these bond? The bonds will be valued according to the valuation policy. For more information, see the Base Prospectus. 4

5 Do these bonds contain leverage? The bonds do not contain internal leverage, and the returns produced should be considered ungeared. Do these bonds contain currency hedging? No. The liabilities of the bonds are GPB which is the same currency as their denomination. These bonds do not contain explicit currency hedging. How liquid are these bonds? The bonds are tradable securities. Although designed to be held until maturity they can be freely transferred to any other person, company or body without any constraint or hindrance. The bonds are also listed. A panel of international brokers can provide terms for such Secondary Market trading. Where and when will these bonds be listed? The bonds programme and each Series issued under it is listed on the Global Exchange Market (GEM) of the Irish Stock Exchange, which is a fully recognised HMRC exchange. GEM is a recognised multilateral trading facility (MTF) under Europe s Markets in Financial Instruments Directive (MiFID). It currently lists almost 9,000 debt securities from around 50 countries. Since its launch in 2009, banks and corporates who have chosen to list their debt on GEM include Coca-Cola, Microsoft, Sky, HSBC and Barclays. Where can I see prices of these bonds? The issuer will publish the prices of each Series on its website twice a week, which can also be obtained from Bloomberg and Financial Express. What happens to the bonds in the event of death? The bonds would form part of the deceased s estate. What is the subscription process for these bonds? Clearing and Settlement for each Series is enabled through Crest, Euroclear and Clearstream and can be purchased using the Series ISIN. The bonds will normally be purchased through a regulated stockbroker, funds platform or financial advisor holding the right permissions. Most bonds are purchased through a Stockbroker s dealing capabilities. See How do I find a Stockbroker for these bonds?. Are there any restrictions on subscription and/or availability? These bonds can be subscribed for by any individual, company or other body subject only to meeting the specific conditions of the issue. The bonds can be freely subscribed for on behalf of clients through pension schemes, investment platforms or stockbroker dealing services. What is the minimum initial subscription amount? When dealing is aggregated through a stockbroker, pension scheme or other investment platform, dealing is in multiples of 1 once the minimum subscription level of 100,000 has been met. 5

6 What currency can I subscribe in? These bonds can be subscribed for in GBP only. Future Series may be denominated in other currencies if there is market demand. Will I have to pay Stamp Duty on this investment? No. This investment falls within the Loan Capital Exemption category, under the Finance Act OTHER FAQS Useful Information For additional information, please refer to Full listing particulars can be found on the Irish Stock Exchange - How do I find a stockbroker for these bonds? Below is a list of potential stockbrokers from whom you may purchase these bonds: Valbury Capital Ltd: provides a full service brokerage bringing traditional high levels of service into today s electronic trading world. The company is authorised and regulated by the FCA and specialises in providing Asian clients with a London based broking service and to give European clients a gateway into Asia. Cornhill Capital Ltd: is a leading independent investment company in the City of London. Cornhill Capital offers a variety of investment services for institutions, corporate and high net worth investors in equity, debt and structured products. The company is authorised and regulated by the FCA. SVS Securities plc: a specialist stockbroker located in the City of London providing services to private, corporate and institutional clients in a number of areas. SVS believes in client-centred relationships and all clients gain access to dedicated personal adviser and market analysts. A global independent dealer-broker specialising in a broad range of financial products with offices in London, Paris, Geneva and Dubai. Provides execution flow, research and technical analysis for a broad range of institutional clients, investment banks and hedge funds. FCA regulated. Please note that this list is not comprehensive and it may be worth asking your existing stockbroker or wealth manager what he/she can provide. A typical stockbroker s commission on a purchase varies from ¾% to 1½%; minimum GBP 10 to GBP 30. Similarly a typical stockbroker s commission on a sale varies from ¾% to 1½%; minimum GBP 10 to GBP 30. 6

7 Corporate Finance Bonds Limited The City Arc 89 Worship Street London, EC2A 2BF T: E: W: IMPORTANT NOTICE Investment in Corporate Bonds and the income from them will be at risk and you may lose some or all of the funds invested, due to potential default in the underlying loan pool. High yield securities are subject to a greater risk of loss of principal and interest than higher-rated, investment grade fixed income securities. Investments in newer markets and smaller companies offer the possibility of higher returns but may also involve a higher degree of risk. This is intended for investors seeking a medium term investment i.e. typically 5 years. If you need to access your money quickly it is possible that, in difficult market conditions, it could be difficult to sell your holdings in the secondary market. Bonds might also become less economically attractive in times of increasing interest rates. Past performance is not a guide to future performance. Investments, or income from them, can go down as well as up. Changes in exchange rates will affect the value of investments made overseas. This brochure, which is a financial promotion for the purposes of Section 21 of the Financial Services and Markets Act 2000, has been approved for UK publication by Clear Capital Management Limited Liability Partnership of 35 New Bridge Street, London, EC4V 6BW, which is authorised and regulated by the Financial Conduct Authority with firm reference number

8 Corporate Finance Bonds Limited is associated to the SA Group of companies