Wasps retail bond - Wasps Finance plc 6 1/2% 2022

edited April 2015 in New Issues
http://www.investegate.co.uk/wasps-finance-plc/rns/launch-of-6-50--secured-bonds-due-2022/201504270700123423L/

Orb listed, £25 to 35m, opens today, secured against stadium.

Club almost went out of business in 2013, bought by an Irish business man, complicated holding structure, Wasps finance is issuer.
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Comments

  • Sounds risky but it's "secured over Wasps Holdings and Arena Coventry Limited, including the Ricoh Arena". Does that mean what I think it does - that in the event of default the bond owners would own the Arena? Might be worth a small punt.
  • The security and the arena is potentially the big positive here although I'm not exactly sure how it would work either. It seems they have admitted they can't get funding from the banks as the club is losing money and almost became insolvent in 2012 and so instead they are approaching retail investors and their supporters. Looks like a significant chunk of the issue will pay off existing and presumably more expensive debt. It's also going to be a small issue which raises questions about future liquidity.

    I'm really not sure if 6.5% is sufficient compensation for the risks and my gut feel is that it isn't for me. I prefer to invest in lower yielding but safer issues ideally investment grade. I worry this is a bit of an opportunistic punt by the owners a bit like the Stobbart bond that ultimately didn't go ahead.
  • Thanks again Oliver for a really good write-up on this issue. A very prompt report, right on the heels of the issue notice - and even more amazingly, Selftrade are participating in this one !!!

    I have the feeling this will fly off the shelf, and an early closure will be on the cards

  • Despite a positive write-up this still feels a bit like buying a bunch of shares in a company on the 'prospect' of its results improving. I guess the rugby connection is attracting interest. I did note that Paul Lewis was tweeting about the risk factors in the prospectus..... Still I am having a small piece of this one..... HG clued up on this one this morning.
  • Just paid £50 commission to Hargreaves to subscribe to this - don't normally pay for new issues, even if Hargreaves is not listed as one of the main brokers. Has anybody managed to get it from Hargreaves without paying commission?
  • This was also first time I had to pay commission to HL in order to get a new issue from them ... Have they changed policy on new issues not directly offered by them.... ?
  • barclays stockbrokers took an order with no commission - goes a small way to compensating for their extortionate bond dealing charges in the secondary market
  • Not convinced by the arguments
    1. When consolidated, ground case scenario is that new entity (Wasps and ACL) might be breakeven. Previously, separate, both have been significantly loss making.
    2. Assuming they raise the £35m then they have £2.25m to pay in interest. Where does this come from? Requires some success in combined venture, even if the first 3 coupons are in an escrow account from funds raised.
    3. How will it be paid back or refinanced after 7 years?
    4. Whole history with Coventry City FC, Ricoh Arena and hedge fund Sisou is a mess, which might come back. Is the repayment of the Coventry Council loan (which was @5%) to distance ACL from any legal repercussions from Sisou claiming C Council loan was illegal?
    5. Regarding Wasps, how loyal is fan base? I would not say it is comparable to a football club. The supporters, even if they number a few thousand, have been majorly messed around with stadia moves further and further out of London. It might be doing well now, but there will be an incentive to chase success with signings if they have money and that might not work.
    6. From my limited understanding, I am not sure how secure the security is.
    a. In the event of a default, Coventry Council can forfeit the head lease if ACL becomes insolvent. ACL would then have the existing lease of 38 years, but it would not necessarily be so easy for the trustee company holding the security to assign the head lease.
    b. Value given by Strutt and Parker for arena is based on occupancy by a successful club/s, which probably would not be the case in the event of this coming into play.



  • Just got my HL order in. They have now decided to waive the purchase commission as they are fully taking part in the offer - so you folk that have been charged may want to go back to them and ask for this fee back !
  • I too found myself sceptical about the idea of lending to a sports club but actually there would appear to be much substance to the new entity as a business.

    Wasps Group CEO David Armstrong certainly talks a good game in the interviews done earlier this month, available to view at:
    http://www.wasps.co.uk/waspstv

    I was particularly taken with the prospects of a new railway station being in place close to the venue as early as this summer and the intended rebranding of the hotel by the autumn as a Doubletree Hilton. Along with a game against the Samoans to be hosted ahead of the World Cup later this year and new sponsors promised, there would seem to be lots of positive stuff being made to happen!

    So far as the bond itself is concerned, I like the fact that there is a guarantee both from the arena and the company itself, with its share in the premiership (and BT bounty), as highlighted by Oliver in his interesting piece.

    As to the profitablity of the venture, who knows? Presumably that is not really the point. Provided the management team is up to controlling the costs involved in securing the many and varied revenue streams now promised, the business should support future bond interest payments and eventual refinancing seven years down the road.........which is all bond holders really need worry about!
  • Not a fan of the business (sport is rather unpredictable), I am still in for this bond based on the coupon, maturity and the guarantee. This is also good to diversify my portfolio.

    going with youinvest as usual, and no fee to sunscribe as usual.
  • secured against the arena. A sport that is on a upwards trajectory and the first 3 interest payments guaranteed. If you don't buy into this one you shouldn't be in bonds! May sound a bit terse but this is as good as it gets for the retail investor
  • HL wrote to me at 4pm saying that the bond can be held in an ISA and SIPP - with no dealing commision for the offer.
    I have a Vantage Fund & Share, so I have replied asking if the same applies to such account.
    Have you applied free of charge via ISA/SIP/Fund & Share? Perhaps the 50£ fee is for Fund & Share and free for ISA/SIP?
  • HLs words to me is that they are now waiving commission regardless of where it goes. In the end i went the SIPP route but they gave me all options. So double check with them but I get the sense that they have come to some agreement hence the change and I was told they now get 0.25% of the issue price.
  • Regardless of the Investment merits I will join the scrum and take a small punt. If things don't work out as planned I can always kick them into touch. Another expression Eddy Waring liked to use was "He's going for an early bath", so let us hope we don't get stung.
  • I am afraid, I'm with Pdepp on this one.
    It is very rare that I don't participate in a new issue.

    1) Premiership Rugby - Attendance League Position
    WASPS Tigers WASPS Tigers

    2007/8 137,055 189,266 2 4
    2008/9 102,415 209,790 7 1
    2009/0 204,775 350,247 5 1
    2010/1 184,317 252,195 9 1
    2011/2 74,195 247,931 11 2
    2012/3 129,644 256,687 8 2
    2013/4 153,691 251,377 7 3
    2014/5 132,536 222,628 6 4

    In 2011/12 the club suffered a bad number of player injuries, which very very nearly put then out of the Premiership.
    Interesting to compare them to the Leicester Tigers, which seem to do well, however even a top club does not mean "good financial results"!
    http://www.leicestertigers.com/downloads/Leicester_Tigers_Annual_Report_2014.pdf
    Turnover 19Million
    Operating Profit 482K
    Interest Payable = £370K (High borrowings!)
    Net Profit after tax = £60K (a loss in 2013)

    2) Location of new Club
    Far away from London & High Wycombe, and too close to Leicester & Northampton!
    Too much local competition for fans

    3) No training facilities yet in place, which will require a large investment

    4) Building Valuation, very subjective.
    If Derek Richardson fails in this enterprise, very doubtful the Arena would fetch any thing close to that it is valued in the books. These buildings cost a lot to run!

    5) Director Loans
    Derek Richardson has already loaned the business £20.4 million, of which he hopes to get repaid £10m from the bond issue. No small sum!

    6) CCC loan is I understand £13.4 million, therefore a large proportion of the bond issue will be paying back two loans.

    7) Litigation Case
    Could be a costly affair!

    Be interesting to see how this new issue is seen by the Professional Institutional Investors

    I cannot see anything positive concerning this issue, the risks are not reflected in the coupon rate. Very much like a mini-bond, but trading on ORB


  • The bond has similar maturity and coupon to Eros and Burford. Will it trade towards the 96 or 106? ;)
  • Following my rather cavalier statement earlier about this bond, I spent the next few days reading other assessments about this issue and my original optimism has been a bit dampened.

    So, I have cancelled my order with Selftrade

    If the price does drop significantly then I may well consider purchasing a few at some later date, as I do like the fact that they offer some diversification



    007


  • Too close to Leicester & Northampton?

    Wasps v Tigers sells out.
    Record-breaking, capacity crowd to watch Aviva Premiership’s new Midlands derby.
    Wasps have today announced that their end of season battle against local rivals Leicester Tigers on Saturday 9th May at the Ricoh Arena has sold out. Demand for tickets to the ‘The Stinger’ has seen all 32,600 seats sold for the game as both clubs continue their fight to secure a top six finish for European Champions Cup qualification and push for the Aviva Premiership play-offs.
  • Felipe, Fine when they are playing Leicester or Northampton at home. However will their "West London" & "High Wycombe" fans stop supporting the Coventry team say in 5 years time. Is the Coventry area big enough to provide sufficient fans?
  • Have cancelled my order. Think the longer term risks are not reflected in the coupon. Director loan and a loss making business also contributed to my rethink
  • ShaunM, they will probably lose some fans and gain new ones but ultimately it all depends on success on the pitch. This is clearly a much more speculative investment than the usual bond offering and appeals to me because I like Rugby. I am aware I'm investing for all the wrong reasons but willing to bet there are many more like me.
    Go Wasps!
  • Felipe, "many more like me", you are absolutely correct, in particular from the number of half page advertisements I have seen (Daily Telegraph, Monday 4th May), which suggests the greater targeting of retail investors compared to institutional.
    ps Beware that "wasps" can have a nasty sting in their tail!
  • I have pulled my order too, on Monday. I decided I didn't like that a big chunk of the money was going to pay off a Director's loan, nor the possibility of a legal issue which even if they win might be a bit costly. I might buy a few if it drops like Eros, otherwise I'll probably let it pass
  • RNS Number : 3025M Wasps Finance PLC

    06 May 2015

    NOTICE OF CLOSURE OF RETAIL BOND OFFER PERIOD

    "This announcement confirms that the Offer Period will close today at 2pm (London time), such date and time being earlier than the originally scheduled end to the Offer Period ("Offer Period End Point") which was 5pm (London time).

    The aggregate nominal amount of the Bonds to be issued will be for no less than £30 million. Wasps will release its announcement confirming the final size of the offer (the "Sizing Announcement") at a time and date shortly after the Offer Period End Point."

    So it's closing three hours early? :p
  • At the risk of sounding excessively cynical, closing 3 hours early is a pretty desperate attempt to put a positive spin on the issue by Investec. Do they really think retail investors are such idiots - closing early, better get the order in!!!! They are £5m shy of what they wanted. Fair enough for politicians to spin, but come on Investec, a 3 hour early close is pushing it.
  • Maybe closing early before even more pull out !!!
  • I'm surprised at the number of experienced contributors who have cancelled orders. Look before you leap?
  • Nah - in my situation got an order in early, just incase it flew off the shelves (HL tell me that orders placed after an announcement of early closure may not be fulfilled) and then taking time to consider the options over the bank holiday weekend
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