Harlequins joins ‘mini-bond’ scrum in bid to raise £15m

http://www.theguardian.com/money/2016/apr/23/harlequins-rugby-mini-bond-invest-risks

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A new investment launched this week is offering rugby fans and others looking for a decent return the chance to earn 5.5% interest a year. Premiership rugby club Harlequins has unveiled “mini-bonds” scheme ahead of its 150th anniversary celebrations this summer.

It is looking to raise £7.5m – and possibly as much as £15m – via the bonds, which are basically a way of raising money from private investors. The minimum investment is £2,000, you have to be happy to tie your money up for five years, and those doing so will receive an interest payment every six months.

At a time when already meagre savings rates are continuing to fall, a 5.5% rate certainly stands out – but those interested need to be aware of the risks attached to this type of investment.

This type of bond is not covered by the government’s Financial Services Compensation Scheme (FSCS) and, unlike some of the other bonds that have been launched recently, the Harlequins ones are not transferable and cannot be traded.

In April 2015 the club’s bitter rivals Wasps launched a 6.5% bond which closed early after quickly meeting its £35m target.

During the past few years, mini corporate bonds such as these have become an increasingly popular route for companies seeking alternative sources of funding. If you buy them you are buying a promise from that company or organisation that it will pay you a fixed level of interest each year for a set period, plus return 100% of your capital at the end of the term. They are generally considered less risky than shares, but more so than putting your cash in a savings account.

The major risk is that if the company or organisation issuing them goes bust, you could lose some – or all – of your money. That will turn off some people, but others will be happy to accept some risk in exchange for a better return, particularly if it’s a big or long-established name behind the bonds.

Harlequins is one of the world’s oldest and most famous rugby clubs. It was founded as Hampstead FC in 1866, changing its name to Harlequin FC four years later, and since 1963 its home has been The Stoop, in Twickenham, south-west London.

It says it has focused on investing both on and off the field, resulting in record turnover of £17.9m for the year to June 2015, and its highest-ever levels of membership – though it also announced operating losses of £1.3m. David Ellis, chief executive of Harlequins, says: “Our goal is to be the best rugby club in Europe and the best sports club in the world.” Last Saturday the club played its Premiership rivals Saracens at Wembley Stadium before more than 80,000 spectators (Saracens won 22-12).

The bonds are being issued by Harlequin Finance, a wholly owned division of Harlequin FC Holdings, which has provided a guarantee, on an unsecured basis, to meet the financial arm’s payment obligations. They will pay 5.5% gross per year, paid in cash every six months, over an initial five-year fixed-term, with the money used to further the club’s long-term ambitions and grow the business. Investments can be made in multiples of £1,000, subject to a minimum £2,000 per person.

However, you can’t withdraw your money before the five years are up, and bondholders will not have any ownership interest in the club or the company – this is basically an unsecured loan. By contrast, the Wasps seven-year bonds were secured on assets including the Ricoh Arena stadium complex in Coventry.

In 2010 the London Stock Exchange unveiled a retail bond market allowing private investors to buy and sell. However, not all bonds are tradeable, and that is the case with the Harlequins’ deal – the offer document says they “are not transferable and cannot be sold or traded”. The offer is open until 1pm on 16 May and all applicants will also be eligible to join the Harlequins Quarters Club. For more information on the launch visit harlequinsbond.com

If you are interested in bonds with a green or ethical slant, check out investment platform Ethex, which has helped raise more than £30m for social businesses, charities and community organisations. It currently has several offers, including a two-year “solar bond” expected to pay 6% interest a year. Launched by Bristol Energy Cooperative, it is open for investment for a few more days having had its closing date extended to 3 May.

Bristol Energy Cooperative is a not-for-profit enterprise that has been developing community-owned energy since 2011, including the installation of solar panels on six buildings in Bristol. The plan is to raise £2m to complete the financing of the Puriton solar farm in Somerset – so far, just over £1m has been raised – and the co-op is forecasting an annual return of 6%, paid gross after two years – though it says “returns to investors are not guaranteed”. The minimum investment is £500 and, again, these bonds are not covered by the FSCS. To find out more and to apply, go to ethex.org.uk/BristolBond