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  • As these are in Eurodallrs will there still be a requirement to complete a W8-BEN ?


    Woz
  • 6.125% for 7 years.
    That's better than I was expecting. I'm going to check if any of my brokers are involved in the launch.
  • Treasury vs Gilt curve is 2.45% vs 0.86% at 5 years, so taking that spread off means its 4.535% , and paid the spread to cover fx futs hedge.
  • iDealing.com the first to come back to me (wow, they even work at 7.25pm) to confirm they will be taking instructions online from Thursday, assuming it's still available.

  • In the cold light of day its sub 4% in GBP, accounting for dealing and hedging costs, taking into account current forward fx rates.
  • The full Monty of over 100 pages is now up on Burfords website if anyone feels that way inclined. See its a US Dollar bond not Euro/Dollar. Given the Pound is firm and probably will continue for a while yet to firm further v the USD forex losses are highly likely even allowing for forward currency cover ( thanks Paddy for the above ).
    For me the whole idea of investing in bonds particularly retail bonds is that they are fairly low risk and reasonably easy to understand, especially if held to maturity, but for sure this bond doesn't fit the bill. I can see it could be highly desirable for U.S. citizens in their home currency and clarity on income tax so could see quite a clammer and the issue will get underway at a fair premium. If i'm correct maybe a stagging opportunity and quick turnaround but probably not for the longer term to be considered 'fairly low risk'. So 50/50 risk for worthwhile capital appreciation, worth chasing. ?
    P.S. hope there's a write up quickly from Oliver as maybe we ( me ) are missing something.

  • How can the RNS state it's a EuroDollar bond yet the prospectus seems absolutely clear that its not amazes me.

    Hopefully we will get some further insight into this bond from Oliver because at the moment for me, I can see nothing very appealing except perhaps stagging it.

    Will the brokers accept orders without an accompanying W8-BEN form is another qustion

    Woz


  • There appears to be a step-up clause which increases the coupon by 1% to 7.125% if -(in summary)

    (i) any member of the Group (other than an Excluded Subsidiary); or
    (ii) any Financial Indebtedness of any member of the Group (other than Excluded Financial Indebtedness), is assigned a credit rating solicited by a member of the Group by any Rating Agency and, in either case, the credit rating initially assigned by such Rating Agency is below:
    (a) Ba3 in the case of Moody
    (b) BB in the case of Fitch ; or
    (c) BB in the case of Standard & Poor


    Woz
  • Woz you're right about the RNS, quite alarming. !
    Yes saw the bit too about the uplift in coupon if there is a poor rating by any agency though doubt that would happen in the short term anyway.
  • P.S. see the USD/GBP is at around 1.4025 this morning so fully breached the fortress marker now.
  • Eurodollar bonds just means it is in US dollars and issued outside of the US.

    It is quite a poor deal actually, US dollar bond yields are much higher than GBP ones. Add to this the FX fees we will have to pay to participate, buy, sell, receive coupons...

    I am out.
  • I've got a feeling that is not targeted at UK retail investors, probably more for US institutional investors, the clause about a step-up coupon in case of low rating is not something the ORB investors have demanded, if smells more of institutional involvement.
    This issue might trade at a premium, but I'm not even sure what market it will trade on, the cost of FX in and out will an additional cost we don't usually have, if it is available to us.
  • Reading the RNS it seems it will be traded on the LSE ORB, don't know which brokers are offering it.
  • Paddy i think you are correct that this really is aimed at US investors/institutions and it's interesting there doesn't appear to be any limit on the volume of bonds/amount on offer so that will be left to 'the market' to decide on the day. Upside is that the 'pro's', if they decide its a goer, will go in big to make it worthwhile for them. For me it just looks like a stag rather than an investment for the longer term and even then with all the hassle/risk involved and extra costs it would need to be maybe 6-7% premium-who knows but that is possible i guess.
  • This is passing the exchange risk from Burford to those investing. Great for Burford but not for me [and it seems others here]. Most likely a pass from me unless A J Bell, our provider, make the process really easy.
  • According to the Information Booklet there will be "a number of authorised offerors" of the bonds. These are listed later in the details as i-dealing.com and Redmayne-Bentley so it doesn't look as if the intention is to spread the offer to all the normal providers.
  • I rang YouInvest, they said they won't offer it because it was a USD bond, which considering the vanilla nature of the YouInvest, is quite a sensible decision.
  • I think Hind and Paddy hit the nail on the head in their posts on 23 Jan. I would want to hedge the currency risk but that makes this unattractive. I looked into this process when considering buying US treasuries recently. I was trying to work out if you could take advantage of the higher rates over Gilts and hedge the currency exposure. Of course the answer is no, it is factored into the cost of the hedge. Always useful to learn this stuff.

    Without the hedge you are speculating on currencies (and the credit) which is a much higher level of risk than I would want to take on my bond portfolio.
  • ISA Eligibility (page 52) of the Prospectus
    This could be an issue for potential investors - needs checking!


    "One criterion of ISA or LISA eligibility is that the securities are issued by a “body corporate having
    share capital” (for example, an English company limited by shares). The Issuer is a Delaware limited
    liability company, which has different features from English companies limited by shares. Accordingly
    individuals wishing to purchase the Bonds through an Individual Savings Account (an “ISA”) and a
    Lifetime Individual Savings Account (a “LISA”) should contact their professional advisers regarding
    both their eligibility and the Bonds’ eligibility as qualifying investments. Neither the Issuer nor the
    Guarantors make any representation that the Bonds are eligible for inclusion in an ISA or a LISA."
  • There are a number of interesting things here. Hopefully, like other posters on here, I'd like all retail bond developments/innovations to be positive for us, despite the hard work of the European regulators who are doing their damned hardest to preserve the bond markets for their buddies who run the banks and the big bond funds what with all the changes under MIFID. So fair play to Burford for flying the small-denomination bond market flag.

    I'm holding my breath to see how a Sterling ORB/LSE listed bond goes down in US$. Here's a stab in the dark: the last deal was not just execution-only retail playing, in addition to my £20k, there had to be institutions to get to the size they managed. So the question is how many of those will play in US$ here. Hopefully, they thought long and hard about this and those same institutions have provided feedback that they can do US$ as well as £. I hope so ...

    From a business perspective, it's a US$ currency business and so raising US$ makes more sense than Sterling. But why not just go to the US market in that case? Probably, because the US market, the US$ high yield market to be precise, would definitely want a credit rating or two and the issuer either does not want to do that, or, they think they would not get a BB rating as implied by the step-up language in the retail bond docs. It's a bit like getting a rating, without actually getting one by using such step-up language ... So going via this £ market is a lower execution cost model. Nothing wrong with that by the way.


  • Having found a more reasonable way to convert fx (0.1%) in the participating broker account have decided to apply for these. Have hedged 2/3 of fx for now
  • I see that there has still been no notice from the London Stock Exchange that this bond will be listed and admitted to the Order Book for Retail Bonds even though the offer closes on 6 February. I know that the announcement only said that Burford "expected" that the bonds would be listed and eligible for the ORB but I would have expected to see some confirmation by now. I'll give it a miss!
  • @hind, When you say hedged fx, do you mean buy USD spot, sell USD forward, or do you mean buy USD spot only?
  • No update from Oliver or any information on YouInvest!
  • @paddy, brought a fx future, which in effect means sold $ at spot today, at same time as did fx exchange
  • @hind which broker are you using? ( re the hedge you need two separate transactions, a spot FX (ie cash) trade (the proceeds of which you use to buy the USD bond) and an offsetting Futures trade, which locks in a Future FX to the Future expiry date , effectively at the cost of the difference of short term USD rates and GBP rates, then you need to keep on rolling the hedge (as the futures expire) as long as you hold the bond.).
    Alternatively you can simply take a punt on the FX, I thought when USD/GBP got to 1.42/1.43 it was fair value in the short term.
  • @Shaunm, since it takes time and effort for @Oliver to do a writeup, the impression I get is that he only does it when he can get some reward for his efforts, which is fair enough.
    YouInvest told me they aren't offering this bond because it is USD (see my previous post for the complications and costs of a fully FX hedged position!)
  • @hind, interestingly the the FX position is fully hedged, you don't really care what the actual FX rate is because if for example you get a worse Spot FX rate, you also get an offsetting better FX Futures price, what you lose on the spot FX transaction you gain on the better (lower) FX Future price (you buy the Futures).
    Also for the others, the contract size of 1 USD/GBP future on CME, is 62,500 GBP. Correct me if I'm wrong on any of this , it's a long while since I've done it.
  • @paddy , it is a painful one off excercise but I have other $ bonds and hedging non uk trusts, so in the hole already. When brexit came I wasnt hedging as thought exchange rates fair and the fall gain was some luck. But then have been hedging as thought £ was too low. Did fx fut at IB and spot at Idealing.
    "Alternatively you can simply take a punt on the FX, I thought when USD/GBP got to 1.42/1.43 it was fair value in the short term. "
    I roughly agree and toke half my other hedging off at 1.40 odd. The way I see it is if the cost is 1.5% pa, will the £ be 12.9% (includes compounding), higher than now in 7 years. Personally think US economy will do better in near term, lot of cash from tax cuts there
  • @hind, I haven't gotten around to opening an account for futures trading, it's a lot of hassle for most of us. You are very much on the sophisticated end of the spectrum for an ORB investor. It will be interesting to see how this USD issue goes, one thing institutions don't like about retail bonds is the long time lag between pricing and allotment, they normally price at the last minute at a spread to the benchmark bond, however my guess is that it will trade at some sort of premium.
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