General Bond Discussion
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Helical Bar 6%
Hot off the press a new bond from Helical Bar has been announced at 6%. Is that rate enough to tempt the masses given there has been a bit of a slide in bonds of late?
I'm interested and will watch what this forum thinks, especially Fang and Arkwelder?
On first sight, not comfortable with this. Issuer is an unrated holding company, with limited control of the underlying business, conducted by its subsidiaries. In the event of failure, assets will first go to their creditors. Leverage near 120%; total debt of 380MM (and only a further 44M headroom) will barely be serviced by operating profit estimate of 16MM for 2013. Lost money in 2008, 2009 and 2011. Their somewhat illiquid share has nicely recovered from bottom of late 2011, which provides some cushion, though. Over to you, Oliver...
They say part of the proceeds will be used to repay an RBS revolving credit facility, page 54 says they're paying between 3.95% and 4% on that debt. That's a 50% increase in interest payments.
Perhaps a better alternative to revisit CLS Holdings 5.5% 2019, still ISA-able, below par?
YTM of CLS 5.5% is approx 5.7%. So slightly below the Helical Bar one. Do you see the credit risk as being better for the CLS bond to compensate for the small negative differential in coupon? Cheers
I don't think 6% is now that competitive and this could equally open down as well as up from the listing price - as yields on everything else are climbing quickly. Sentiment towards bonds seems to have changed significantly over the last month - can understand some drift down but it seems a daily relentless trend at the moment, and until they in general find some new level I am inclined to sit on the sidelines with this one. Be interested to hear more thoughts though...
worth re-reading F.I. assessment of CLS. Strong covenants, and considerably lower leverage than Helical, also wider geographical spread. Stock performance looks solid, and their exposure to inflated housing market was greatly reduced prior crash. Credit risk would therefore appear to be better, more than compensating for lower coupon. Very much a one man band, though, Swedish chief owns 53%. Got it right so far, future is anybody's guess.
Helical Bar Plc,
Generally I would prefer to see a company with Net Book Value & Market capitalisation of over half a billion, closer to the billion the better.
£253m = NBV
£308m = Market Capitalisation
Being in the property business, my next question, would be,when will the next property crash occur?
Working on the property cycle of 12 years up, 6 years down
2008, 9 , 10, 11, 12 & 13 could be treated as "down", although London seems to be different due to major capital inflows from abroad.
Therefore with 2014 counting as the start of the main upturn, next major downturn is around 2026.
Therefore any major down-turn is unlikely to happen in the next 7 years.
With major economic structural problems within Europe, inflation is unlikely to rear it's head shortly, more of a problem could be deflationary pressures & economic stagnation.
Despite the lower capitalisation, I'm likely to apply for a moderate holding, but less (half) than earlier 2013 new ORBs.
Comparison with the CLS 2019 5.5% bond seems a fair one.
Both companies are involved in property investment /development and the term of both bonds, at some 7 years, is similar. Helical Bar is the smaller of the two but still a FTSE250 company and the interest rate on offer is higher in compensation, at 6%. Both companies appear well funded for the next few years at least, at comparatively low cost. Interest cover appears stronger in the case of CLS in recent results but we should bear in mind that the development element of profits - or losses - can be a moveable feast.
Helical Bar's see through loan to value is most recently quoted as 46%, which compares favourably with CLS 59% at date of last accounts. It's also good to see that financial covenants undertaken with the Helical Bar bond appear slightly stronger.
I note the comments about Helical Bar being an unrated holding company, leaving bondholders exposed if subsidiaries fail. CLS, also unrated, attempts to address this issue through ring fencing loans in special purpose vehicles. I'm sure this approach has some merit, although I would worry about cross guarantees.
In short, it seems to me that we are not dealing with chalk and cheese here. I suspect this new offering from Helical Bar may be worthy of serious consideration for addition to a diversified bond portfolio.
Sound reasons for thinking otherwise are of course welcome......
The company has signed a revolving credit line with Barclays
looks a bit strange just after the new bond issue, could it be a sign that the bond issue is not going well?
Other hand, it could be the complete opposite, Barclays only agreeing to the new facility once it was known that the bond uptake is going as plan. No doubt the new bond enhances the bargaining power for Helical Bar management when negotiating any new facilities
Closing early-11AM 12/6/13. Assume they have at least what they want if not a little more:-
I have slightly mixed feelings on this one. It's good to see that the management team owns 16% of the company, though most of that (11% of total ownership) appears to be in the hands of the Chief Exec.
According to Digitallook, revenue is expected to fall from £65.44m in FY 2012/13 to £20m in FY 2013/14. Is that primarily through lack of disposals expected in the coming year, or is there some other issue that I should be thinking about ?
A pity that Fixed Income Investor didn't get round to doing a Bond of the Week on this. Some of us take a few days to organise the cash resources after making up our minds to purchase, and it helps to get the background information as early as possible.
Game changed, atleast for a short while making 6% for risk here unattractive. Think will put new money at short end of curve till see where long end bottoms
With the announcement that the Savings Rates for NS&I are being reduced from Sept, no doubt more savy investors will be parking their money, in particular the retired, in these type of bonds.
Demand is likely to increase than reduce
edited June 2013
Seems to have been no problems at all with Helical Bar getting a decent chunk away:-
HELICAL BAR PLC
GBP80,000,000 6.00 per cent. Bonds due 2020 (the "Bonds")
This announcement constitutes the Sizing Announcement referred to in the Prospectus and must be read in conjunction with the Prospectus.
Issue Date: 24 June 2013
Total principal amount of the GBP80,000,000
Estimated net proceeds of the GBP78,900,000
Expenses relating to admission GBP4,000
to trading of the Bonds:
Michael Slade, Chief Executive of Helical Bar plc, commented:
"We are extremely pleased by the positive response to the launch of Helical Bar's first retail bond. This bond enables us to further diversify our funding sources with an entirely new source of funding whilst extending the debt maturity profile of the Group."
The bond is trading slightly up, 100.25/100.75
Bit late but worth a look for some:-
Good write up, information on market size very informative
Bond worthy to be part of a diversified portfolio.
However, I am concerned about the length of time it is taking you & Mike to paddle around the "Isle of Wight". One sixth indicates to me that you have paddled 10 miles out of the 60 miles. You may wish view the following article re a group doing it in 18 hours!
This last weekend I (part of a Midlands club) paddled the Thames from Cricklade to The Ferryman Inn at Bablock Hythe, 2 days paddling of 6 hours per day (32 miles total).
I suggest a greater commitment - No doubt you can "self-rescue", as your articles are extremely welcomed by this forum!
Best of luck for your future paddles!
A very belated thank you to shaunm for his links and comments on kayaking. I was aware of some maniacs who had done it one day and it puts me to shame. I shall try to improve but fear any improvement will only be limited.
Just released some cash from sale of ICG7 2018, which was quite high at 107 given its short duration, and looked around for something else. I missed out on Helical Bar at issue but reading back through Oliver's write-up at the time and comparing it with its peers (Workspace, CLS, St Modwen), decided that this looked like a good replacement even if not like for like. Bought it at 103.2. I'm aware of the unfolding situation with London property but reading through the terms of the offering, it's something I can live with.
Looking at the other property bonds, it appears that there is even some scope for the price to rise.
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