Lendinvest - New Retail Bond 5.25% 2022

Just got back from holiday and found this IPO in my selftrade account. Looks interesting, currently reading annual report and a credit rating here:

https://www.lendinvest.com/wp-content/uploads/2017/06/2017-Annual-Report-signed-1.pdf

http://www.arcratings.com/admin-uk/modulo_projects/ficheiros_projectos/20170624010437-1arc_ratings_lendinvest_23_june_2017en.pdf

I also have a prospectus via logging into my selftrade account
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Comments

  • Wow an awful lot of reading to get through but on the face of it it looks attracive but hopefully Oliver/others will have a say about the issue to steer us ( well me anyway ! ).
  • not for me probably.
  • edited July 2017
    This bond is unrated but the yield on offer suggests a sub investment grade rating. The bookrunners will have advised LendInvest at what level they will generate enough interest so the coupon rate has significant meaning. This bond investment is not without risk. Some comparably priced bonds in the market are:

    Virgin Media Finance 5.125% 2022 (yield 5%, rated B )
    RAC 5% 2022 (yield 4.8%, unrated)
    Talk Talk 5.375% 2022 (yield 4.5%, rated BB-)
    the AA 5.5% 2022 (yield 3.9%, unrated)
    Ladbrokes 5.125% 2022 (yield 3.7%, rated BB)
    Jaguar Land Rover 5% 2022 (yield 2.4%, rated BB+)
    FirstGroup 5.25% 2022 (yield 1.9%, rated BBB-)
    innogy Finance 5.5% 2022 (yield 1.5%, rated BBB)

    LendInvest currently only offer Bridging and Development loans, but do intend to offer Buy-To-Let loans in the near future. The loan book is heavily concentrated in the London & South East area at 83% (down from 88% in March 2016). LendInvest's client base of "experienced landlords" typically require loans in the range of £750k to £7.5m. Recent numbers from Lonres show that sales values per sqft for houses priced between £2m and £5m in London fell by 8.4% year on year in Q2 2017. Now, some of this will be due to the increase in stamp duty in April 2016, but I don't doubt that the residential property market in London is suffering right now. With Brexit uncertainty continuing and Central Banks talking of rising interest rates in the future, one struggles to identify positive aspects of the London property market. Sterling weakness enticing foreign buyers would be one positive, I suppose.

    That being said, so long as LendInvest keep a close eye on their loan book and do not allow the quality of their loans to dip over time, bondholders should be protected by the Guarantee and the buffer provided in LendInvest's average LTV ratio (LTV not to exceed 75%). Should there not be a sustained fall in London property prices of more than 20-30% over the life of the bond, and should LendInvest continue to prudently manage their business, I don't see why investors wouldn't get their money back.

    From a market technicals point of view, the yield of 5.25% is impressive, and with such a lack of new issuance in the retail market I expect demand will be high. It may well go up to a small premium. Just keep a very close eye on the quality of the loans and the health of their borrower market: London residential property priced roughly between £1m and £8m.
  • Thanks burberryjam,interesting comments and pretty much my early conclusion too. I am not overly exposed to London/South East property markets at the moment so this could be of interest and i guess it should be ISA erable given its 5 years to maturity so this may increase its attractiveness to some. So 5.25% nett/gross sounds reasonable i think for the risks outlined.
  • edited July 2017
    Thanks. FWIW I'm pretty sure HMRC axed the 5 year bond rule a while back, and I don't see reference to it here https://www.gov.uk/individual-savings-accounts/how-isas-work

    Oh and I believe I left out one of the more relevant comps, Paragon...

    PAGLN 6% 2020 yields 3.8%
    PAGLN 6.125% 2022 yields 4.5%
    PAGLN 6% 2024 yields 4.6%

    The 2024 just scrapes a BBB- rating with Fitch.
  • Thanks again burberryjam for your comments/table. Ref ISAerable i think you may well be right that it doesn't apply anymore but will double check before making a move-not to be sniffed at either gross or nett. Just hope Oliver makes a comment asap as feel this issue could be off the table somewhat early.
  • ISA is fine, you can do what you please now - all cash, under 5 year bonds or pretty much anything else
  • I rarely pass up an ORB bond issue as I want to recycle those of my bond holdings which are trading well above par. However, I have not seen any positive press comment on this issue, the company does not seem to have been trading long and also the shareholders equity seems too small in proportion. Therefore I am going to pass.
  • I haven't seen any comment positive or negative, this one seems to have snuck up unannounced. Company seems well run and profitable but I agree they are small and haven't been trading that long. I have similarly only passed up a few retail bonds (Eros and Wasps spring to mind) but will recycle some spare cash to invest in this as a small percentage of my total bond holdings.
  • I agree with Gliderpilot, it doesn't have the track record that would add comfort, I could see this type of company being in the first wave of casualties in a downturn.
  • I will be giving this one a miss
    Too low "Total Equity" @ 8 million
    Loss for year ending 31st March 2017 of 1 Million
    Lack of Financial history
    Do the sums of the business add up?
    They will be paying 5.25% for 5 years
    Currently a person can get a mortgage, fixed term for 10 years @ rate of 2.64%
  • Too low "Total Equity" @ 8 million
    Loss for year ending 31st March 2017 of 1 Million
    These are for the Guarantee Company - Lendinvest Ltd
    No Trading information for 10408072 : LENDINVEST SECURED INCOME PLC
  • development and bridging loans can be in the region of 10%
    the bond is secured against the properties
  • Burberryjam,
    Appreciate your comment, however entering a new business area can be difficult, it reminds me of the Providence Mini Bond failure
    http://www.thisismoney.co.uk/money/investing/article-4112816/Investors-failed-Providence-mini-bonds-unlikely-8-15m-according-administrators.html
  • This is different beast from Providence - I wouldn't go anywhere near any mini bonds. These guys have a track record going back to 2008 and after reading all the bumf I'm happy with it as a 2% part of my bond allocation. Everybody has to make up their own mind that's the fun of investing.
  • Frugal, be interesting to see if this one flies off the shelf (as in recent issues), or in the case of the Stobart issue a few years back, gets struck in a traffic jam.
    I'm getting very edgy regarding the financial markets.
    BREXIT current issues not helping general "investment decisions", in particular re property.
  • Stobart never actually issued because of lack of interest. Eros had a very unusual corporate structure that raised alarm bells from the outset. For all its failings and I sold a while back, Wasps is still above par. There are plenty of other London property and mortgage-related firms in the ORB market all trading with yields much lower than this issue, so the fact that it is property-related should in itself not deter people. I agree that the nature of the guarantees and the sustainability of its business model need to be scrutinised but that is where we have all relied heavily on Oliver in the past. I am inclined to invest a small stake but might be convinced otherwise.

  • bigdave - thanks for that

    I tend to put in orders as soon as I hear of a new placing, and then as I read/dig around more, I can go back and modify it.

    For those investments where I think a small gain can be realised in the first few months, I often buy more than I end up keeping, and subsequently sell. Not talking huge amounts, just enough to take Mrs Woz out for a couple of meals.

    With Lendinvest, I began feeling a little wary, so I cut my order by 33%, within a day or so of placing it

    Over the weekend I came round to think that perhaps the coupon for a 5 year bond was possibly a bit on the low side and I would do better by waiting a while and perhaps buying at just below par (or even at par if it came to it) at a later date

    The article you flagged certainly seems to think that might be the case, so I'm sleeping on it and may well cancel the remaining 67% tomorrow.

    Like others, I am hoping that Oliver B is able to make some comments soon

    Woz
  • I've been tempted by most of the retail bonds that have come to market since 2010 and I've bought into quite a few of them but I think I will give this one a wide berth. Any shocks to the economy and the likes of this one will be the first to tank.
  • I think I'll have a few of these, although not for especially positive reasons ...

    1) Lack of other sensible investments

    2) If the economy goes down the pan to the extent all of the equity in the business is wiped out AND the LTV ratio is damaged so badly the cash can't be recovered from the properties they've lent against, then losing a few grand on this bond is going to be the least of my worries
  • lol at DSC.

    That's secured it for me 0.5% of my SIPP in this it is then.

    You're right if this goes down the pan I'll be protecting the tins in my cupboard with a shotgun from my starving neighbours
  • I cancelled a further 33% of order leaving me with 33% of what I originally had.

    Currently I don't have that much of a problem with the company, as long as one keeps one's eyes on it - my main concern is that I think they may be cheaper to buy in the coming months - if so I'll top up then

    We will see !!!!!
  • Wozz - given that the offer has been open for a while and hasn't closed early suggests you're probably right in thinking it won't shoot up to an early premium

    And further to my previous comments, one positive in my view is that 5 years is quite short compared to some other recent issues and I can't see much interest rate risk for a few years while the Brexit farrago plays out
  • The Daily Telegraph (Questor) has an article on this bond, today's issue
    Indication of a buy, but saying there is a risk. Very little more info re LendInvest
    Some information within the article is inaccurate, as it indicates only one new ORB bond issue this year (Greensleeves), whereas there have been two (Dolphin), both Retail Charity Bonds.
  • Good to read everyones feelings on this above and i have decided to go for a smallish lot in either my ISA or Sipp so heres hoping. !
    BTW Shaunm don't forget we also had the Burford 2026 bond this year too so the D.T. were doubly wrong.
    Have a good day all.
  • Just seen an article online from the Daily Mail site 'This Is Money' posted about 2 hours ago. The article is fairly basic in nature and mostlt aimed at inexperienced investors as there is an accompanying feature about the pros/cons of bonds etc. In general the tone is i would say luke warm but with the normal caveats. Certainly nothing too detrimental.
  • Here is a write up from Altfi as Lendinvest could be considered in the peer 2 peer space. Makes some interesting comparisons with rates available from Zopa, Ratesetter and the Funding Circle Investment trust. I must admit I have nibbled at the P2P investment trust and VSL now they are trading at large discounts to their Net Asset Value after all the hype of their launch has died down and returns have turned out to have been ok but not as spectacular as some were presumably expecting

    http://www.altfi.com/article/3267_is_new_retail_bond_from_lendinvest_a_buy

  • Not much appetite for this as the offer is still open. I can't remember the last issue that was open for quite so long.
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