At the end of last year I had an optimist feeling that for 2014 the ORB would see a raft of new bonds coming to the market
As we come to the end of Q1 this optimism appears to be misplaced. The number of new listings; (or was that a solitary listing?) have been woeful, and the increase in volumes would have been much worse if it was not for existing bonds being topped up under current listings.
I had a belief, as widely predicted, that late 2014 early 2015 would be the cusp for the upward movement in interest rates. Subsequently it is assumed that CFOs and alike would in early 2014 be reviewing their debut provision over the medium to long term and would look to lock their borrowing in at rock-bottom levels. This does not appear to have materialized. This then begs the question that when all factors indicate now is the time for the ORB to flourish, why is it not?
Much has been made about business being able to attain loans at competitive rates, but from my analysis of Blue Chip 250, AIM and FTSE listed companies, they have by in large been able to access competitive finance over the last 2-3 years. It was the next tier of small to medium size PLCs, and Ltd companies that had struggled to find finance as banks and financial institutions tighten their lending criteria. This however has eased over the last 18 months with the addition of peer and crowd lending, as well as government backed loans, interest rates for these types of businesses have reduced considerably
A look at the ORB in comparison to its siblings in Italy and Germany show that the ORB is dominated by large/PLC companies as opposed to a more widespread range of companies (If anything in Germany the bourse is more skewed to the SME sector.) I cannot with any certainty state that to bring a bond to market via the ORB is a more or less costly than using a Continental bourse, but with a greater proliferation of small companies I think it would fair to assume that cost is not as greater a factor in bring a bond to market in Italy or Germany as say to the UK.
By nature I took the razzmatazz of the ORB birthday celebrations last month with a degree of skepticism, and for the press release and online material that was released it did appear that there was an element of talking up a bad situation. Clearly the ORB, and three years on from its launch, is not obtaining the volumes that are needed to make this sustainable, nor is it appealing to as wide a potential field as other more established bourses have.
Would be interest to hear how others see the current situation and where they see the ORB in the future?
PS – Sods law dictates that in the next 30 days 20 bonds will come the market representing all segments, ownership types, and sizes and thus once again it is all sweetness and light in the ORB world : )