Traditional options london stock exchange dubai
Retail bonds have been increasingly attracting savings from individual investors in the UK to provide funding to mid-cap companies. Demand for retail bonds seem strong as investors seek higher yielding alternatives to traditional savings products and equities. Long-term structural changes to the funding traditional options london stock exchange dubai are affecting traditional financing routes and in response companies are seeking alternative funding options.
These developments and certain regulatory reforms should increase funding of mid-cap companies through bonds by individuals in the UK in a similar manner to other parts of Europe such as Germany and Italy. Even among individuals able to invest in wholesale bonds, the lack of price transparency and liquidity made direct investments in bonds unpopular, with investments often being made through managed bond funds.
The amount of capital usually raised in primary issuances in the UK retail bond market also more readily allows midcap companies to raise capital appropriate to their funding needs. Wholesale bond markets have often been closed to mid-cap companies as, among other reasons, institutional investors have preferred to invest in larger sized bond issues by large companies and banks in order to promote liquidity.
Although the UK retail bond market initially focused on household names or larger companies, recent issuances have been made by lesser known traditional options london stock exchange dubai and a number of further such issues are believed to be in the pipeline. The recent issue by CLS Holdings, whose business is predominantly owning overseas properties, also suggests that the business does not even have to be UK-based. As in wholesale bond markets, however, companies with predictable revenue streams may be regarded as more suitable so as to cover the fixed income nature of bonds.
A key legal factor as to the appropriateness of ORB for potential issuing companies is whether it can meet the listing and disclosure requirements, including continuing obligations such as production of accounts in a timely manner, which may be difficult for smaller companies to comply with. Retail bonds may also be appropriate for housing associations, local authorities and infrastructure companies.
The housing association, People for Places, has made two successful issues of retail bonds since the beginning ofand a number of local authorities and infrastructure companies traditional options london stock exchange dubai reportedly considering retail bonds as a possible source of funding. Retail bonds issued by mid-cap companies have had annual coupons of between 5 per cent and 8 per cent. Bonds may be a relatively cheap form of finance and they do not dilute existing ownership of the business.
Investors also benefit from investing in retail bonds by gaining access to a higher return than bank deposits and a more secure income compared with shares. The retail bond market also offers an opportunity for mid-cap companies to publicise their company traditional options london stock exchange dubai may be used to target a specific audience, such as their customer base.
Launched in Februarythe ORB has been modelled on the successful Italian electronic bond market, the MOT, and provides retail investors with a cost-effective, transparent and efficient mechanism for trading bonds. The ORB has an open and transparent market model, which allows private investors to trade bonds efficiently, through private client brokers, in a similar manner as with shares. All bonds traded on the ORB are priced throughout the trading day by market-makers and are subject to a flat transaction fee of 90 pence for each order.
As the bonds are admitted to the EU-regulated Main Market, there is a high level of regulatory oversight and investors benefit from the transparency afforded by the disclosure and continuing obligations regimes. Despite the sovereign debt crisis and general economic fragility, retail bond issuances have remained healthy, with some issuers offering repeat issuances.
The bonds issued offered either a fixed rate or an index-linked return for a tenor of between five and 10 years. In order to list retail bonds on the London Stock Exchange, a number of requirements must be met:. The process of issuing retail bonds, from initial appointment of advisers to completion of the offering should take six to eight weeks for a straightforward transaction. The marketing process is usually carried out in a number of stages following a Bloomberg release by the company of its intention to potentially issue retail bonds.
In the first stage, management presentations are made to private client brokers as potential distributors. Traditional options london stock exchange dubai coupon for the retail bonds is then set and the prospectus published to start the public offer. In recent issues, the usual two-week offer period has closed early due to strong investor demand. An information booklet summarising the bonds and advertising materials are usually published. Distributors traditional options london stock exchange dubai invite their client bases to participate via an email.
The size of the issue is then determined and announced with the actual issue occurring a few days later. As regards documentation for the offering process, a recognised set of agreements is now being used — in order of signature: The documents constituting the retail bonds will be similar to those for wholesale bonds, requiring a prospectus, a trust deed, a paying agency agreement and a global bond.
While many retail bonds issued in the UK have been listed and traded on the ORB, a number have taken the unlisted route. These are non-transferable bonds also known as mini-bonds typically targeted at raising funds directly from customers and have been the preferred route for some mid-cap companies. They differ from listed bonds in that they are not traded on a platform such as the ORB and therefore investors are unable to sell their bonds and have to hold them to maturity although earlier redemption may be made by the issuer where there is an option for the issuer to redeem the traditional options london stock exchange dubai prior to their scheduled maturity.
Unlisted bonds often pay higher coupons compared with listed bonds, perhaps reflecting their greater risks and lower tax efficiency. They have also offered unusual coupons instead of or alongside cash interest. While a Prospectus Rules-compliant prospectus is not required, an information document will generally be published to explain the terms of the bonds and provide information on the issuer.
The marketing of the bonds will need to comply with the financial promotion requirements under the Financial Services and Markets Actwhich includes the issue or approval of marketing materials including the information document by an FSA-authorised person. Recent regulatory developments should assist the issue of retail bonds by mid-cap companies. The Amending Directive has also extended the scope of exemptions from the need to publish a prospectus, which may make issues of smaller unlisted bonds easier.
Retail bonds offer an alternative for mid-cap companies to raise capital for growth and acquisitions. Although retail bonds are not suitable for all businesses, there is strong demand from retail investors and continuing traditional options london stock exchange dubai, which is likely to result in increasing importance of the UK retail bond market for both mid-cap companies and UK retail investors.
Online services, resources, and tools Technical resources Stay connected. UK retail bonds for funding mid-cap companies Publication April In order to list traditional options london stock exchange dubai bonds on the London Stock Exchange, a number of requirements must be met: The company issuing the bonds must be able to present two years of audited financial statements prepared in accordance with International Financial Reporting Standards or equivalent this is reduced to one year in the case of small and medium-sized companies following amendment of the Prospectus Rules as of July 1, A prospectus complying with the retail debt provisions of the Prospectus Rules must be prepared.
The bonds must be freely transferable. All the bonds of the same class must be listed. The following requirements must also be satisfied traditional options london stock exchange dubai retail bonds to be admitted to the ORB: When applying for bonds to be admitted to trading on the LSE, the issuer must specifically request that the bonds be admitted to the ORB.
There must be a committed market-maker willing to provide two-way on-screen prices throughout the trading day. No rating of the bonds is required. Subscribe and stay up to date with the latest legal news, information and events