London Capital and Finance Plc Mini-bond Review

edited October 2017 in New Issues
A two part independent review, both negative and positive, of the LC&F company and minibond is posted in another London Capital and Finance thread in the Savings and Investments forum. As the review is far too many characters to paste here, the link to the review is:

Post #95 below is for Part 1 and Post #96 below is for Part 2 of the review.
http://forums.moneysavingexpert.com/showthread.php?p=72739908#95
http://forums.moneysavingexpert.com/showthread.php?p=72739908#96


Any replies you wish to post having visited the above link, please do so on the above post link in the currently active thread, or here in the Fixed Income Investor Forum.

An extract of the review from Part 1 follows:

LONDON CAPITAL AND FINANCE MINI-BOND REVIEW PART 1

London Capital and Finance (LC&F) Plc (UK Companies House number 08140312) describes itself on the website, www.londoncapitalandfinance.co.uk, as a successful and expanding commercial lender and corporate financier, although the activity of LC&F, according to the company information site Endole, is the provision of raising funding through the issuance of private bonds. The direct issue of the LC&F mini-bond is intended to raise income to further this activity. Details of the unsecured, unregulated mini-bond certificate of debt or loan note offer are not presented here in the review. Visit the LC&F website for information about the up to 8% per annum interest 1-3 year term LC&F mini-bond security.

For company and financial information about LC&F Plc and the directors visit the following UK websites: the companieshouse website, the duedil website, the endole website and the companycheck website. These websites provide accounts and returns information, officers, address, current liabilities, current assets, net assets, cash, turnover, and more for UK companies registered at Companies House.

The well designed LC&F website along with the well-staffed and competent mini-bond marketing and financial team is mostly about the public direct marketing of the corporate minibond and the prospectus. You will find little about LC&F business operations and activities on the website, other than that they are a commercial lender or corporate financier. Little detail about the company track record and how it is raising and paying the interest to the bondholders, and repaying end of term principal capital. These are the most important aspects from the bondholder investor point of view. The website is all about marketing the mini bond, not about the loan business side of LC&F and its practical discharge of its responsibility for fulfilling the financial obligations to investors. What a financial company states it is doing is not always what it is doing.

The financial regulatory requirements are much less stringent for mini-bonds than for listed corporate bonds. This is great for the businesses issuing them as it saves on paperwork and reduces the problems of dealing with banks and other financial institutions. In the case of a UK stock market traded corporate bond the detailed prospectus, with FCA mandatory requirements, for the corporate bond and the bond issuer are legally and financially scrutinised before being approved for a stockmarket listing. In the case of the non-traded direct LC&F minibond the company is not required to do this. The company do not have to provide a detailed, legal, financial, independently scrutinised prospectus for the company itself, nor a prospectus following FCA regulations. However, any financial promotions, including public offers must be approved by a FCA authorised person, who must approve the invitation document and all related promotional material as financial promotions.

The LC&F mini bond issuer only has to provide a prospectus or financial promotion document for the mini bond offer following FCA rules for the prospectus publication, the type and description of the financial product, and that the retail investor is appropriately certified, that is, a sophiscated and high net worth investor. (For more background about mini bonds as instruments of investment see APPENDIX 1.)

In practice what is important here is, unlike a UK stockmarket traded corporate bond, the mini bond issuing company is not required to substantiate or prove, only state, in the bond documentation or prospectus what they claim to be doing as a business in order to fulfill their financial obligations under the bond issue, such as payment of bondholder interest under the mini bond loan.

The LC&F mini bond security is a certificate of debt or debt security, an IOU or loan note. It is unprotected. It is an unregulated investment and the investor has no protection against losses under the Financial Services Compensation Scheme (FSCS). All investment monies in the minibond loan including interest and all capital may not be returned to the bondholders. If the LC&F company goes bust investors may lose due interest and all of the capital investment. As is the case with most mini-bonds the LC&F mini-bond is unprotected, non-convertible, un-tradeable and carries a risk so a return on investment is not guaranteed, nor return of capital. (For the full LC&F disclaimer of liability on the website see: http://londoncapitalandfinance.co.uk/disclaimer)............continued

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