Providence mini-bond 8.25% over 4 years

Hi All - does anybody have a view on the above mini-bond that I received an email on today? Thanks

Comments

  • looks a bit better than some of the other mini-bonds I've seen - there seem to be some guarantees and they're not offering to part pay in chocolate or some other such guff
  • Struggling to find any financial information on the group, so difficult to make a case for investment.
  • if you google providence mini bond 8.25 a fair bit of information comes up which may help. certainly a good rate at 8,25
  • yes - I had done a trawl through Google, read the prospectus etc. However, perhaps I just missed it, but there did not seem to be much on the financial performance of the Providence Group itself to date.
  • I am the Providence Bonds plc UK Director of Business Development and Investor Relations.

    I cannot and will not give investment advice; this investment will not be for everyone so potential investors should seek independent investment advice and carefully read and understand the risks discussed in the Invitation Document and on IPM's website.

    see www.ipm.fm/wp-content/uploads/2014/11/Providence-Bonds-plc-Invitation-Document.pdf

    I can however, give and/or correct some facts.

    The Providence group has 21 offices in 12 territories across 4 continents and started out as traders of physical commodities. It is now involved in commerce, trade, trade finance, factoring and fund management and has found the most efficient way to fund its activities has usually been from non-bank sources.

    We are passionate about funding Small and Medium sized Enterprises that are the backbone of an economy but, as the founders started using their own and family money, we developed and put in place pretty strong safeguards and security.

    Providence Bonds plc believes it has brought that approach to its Mini Bond, with three levels of security;

    The first stage.
    When Providence buys invoices from Small and Medium size Enterprises (SME's), they can get restitution from the assets of the debtor if the company paying the invoice defaults. If there is a dispute over the invoice, Providence can recover the disputed amount from its factoring client. Providence forms business relationships with all its counterparties and undertakes rigorous credit checks. It also monitors the transaction for any sign of trouble or a change of circumstances. This means that the investors' money is supported by factoring client assets. Not to suggest that it will always be the case, over the past four years we have experienced an initial default rate (non-payment on due date) of about 2.5%; but because we have chosen our clients carefully, our final non-recovery of extended assets has been zero. http://www.providencebonds.com/about-us/#meet-the-parent.

    Second stage
    If there is a shortfall in the amount owed to our investors, Providence Bonds plc's parent company, Providence Global Limited is standing as guarantor, with all their global assets.

    Third stage
    Independent Portfolio Managers Ltd is an FCA regulated firm and acts as security trustee for the bondholders; if Providence Bonds plc defaults they can ultimately take possession of the company's assets on behalf of bondholders.

    Even though Providence is a privately owned company, we have taken the step of publishing a financial summary of the Global Factoring Operations on our website (see http://www.providencebonds.com/about-us/#meet-the-parent ).

    This product is not covered by the FOS (www.financial-ombudsman.org.uk) or FSCS (www.fscs.org.uk).

    As I said before, this is not for everyone, but for those that understand the underlying business, the risks and the safeguards put in place, they and their financial adviser can assess whether the risk profile is appropriate.

    If you have any questions please email me at [email protected] or connect with me on LinkedIn - uk.linkedin.com/in/jamesvinall/

    James Vinall​
  • belgraviaboy2, as you indicate, very little financial information concerning the holding company. The financial summary as provided by James indicates a very small business, which it seems is operating in "several countries". In the UK, I would have thought "Invoice factoring" is a very competitive industry", therefore could be very difficult for a new comer to make money.

    The trading subsidiaries registered (those I have found) within the UK are as follows:-

    08693040 : PROVIDENCE FINANCIAL SOLUTIONS LIMITED
    Incorporated 17 Sept 2013

    08659919 : PROVIDENCE WEALTH LIMITED
    Incorporated 21 Aug 2013
    Accounts to 31st December 2013 Net worth minus 287K (Excl any goodwill)

    09218764 : PROVIDENCE BONDS PLC
    Incorporated 15 Sep 2014

    09217182 : LUMIERE FINANCIAL ADVISORY LIMITED
    Incorporated 15 Sep 2014

    Not, I am afraid, my cup of tea!
    Would suggest more financial information of the group is required
  • James,

    Thank you for coming to the forum and explaining your proposition.
    As retail investors it is pleasing when we can engage directly with the companies involved.

    My first question is obvious:
    + Why have you chosen to raise funds via a mini bond and not via a standard retail corporate bond?
    I dare say that given the “hunt for yield”, tight spreads and dearth of new issues recently, you could have achieved a lower cost of capital as there are many, many people desperate for income and most of us prefer our income-producing assets to sit within an ISA or SIPP wrapper.

    Second question is:
    + Could you please provide a link to the company accounts? I could not find investor information and audited accounts in your website. Apologies if I have missed this.

    Good luck with the fundraising and hope to see your company’s name in the retail bond market next time round.
  • I will reiterate that our Mini Bond will not be for everyone and any suitability or appropriate risk issues should be addressed to a qualified professional after reading and understanding the Invitation Document.

    According to the Federation of Small Businesses only 3% of UK SMEs use factoring/invoice discounting as a source of business finance, which suggests the industry in the UK is patently not competitive enough.

    This Mini Bond is the Providence Group¹s first UK onshore funding exercise which is raising our profile with investors. Our simple business model is to provide competitive rates to SME¹s from money directly raised at good rates from investors.

    We feel this bond is appropriate for SIPPs as there is a probate clause (11.3 of the Bond Instrument), but the final decision rests with the SIPP providers.

    Our UK company is new (so no accounts) but benefits from investing in the current Providence factoring operations (which is why we have provided its numbers that show rapidly expanding and profitable growth) as it grows its UK business - normally a new business would have no way of providing an income to investors while it became established; it would essentially be an equity investment with all the inherent risks. Our Mini Bond gets the income to pay investors from the established sales of our existing factoring clients and not from aspiration or expectation of growth from a plan yet to be executed.

    The figures on webpage http://www.providencebonds.com/about-us/#meet-the-parent section 4 are the financial global factoring operations of the Providence group, which covers the existing businesses in the USA, Brazil, Hong Kong and China.

    These figures come from audited accounts that are private, but have been seen and approved for publication for the purposes of financial promotion by Independent Portfolio Managers Limited (FCA Reg No. 184115).

    This Mini Bond is not covered by the FOS (www.financial-ombudsman.org.uk) or FSCS (www.fscs.org.uk), so is not for everyone. For those that understand our underlying business, the risks and the safeguards we have put in place (that have been built over a decade by the founders using their own money) then they and their financial adviser can assess whether the risk profile is appropriate.

    If you have any questions please email me at [email protected] or connect with me on LinkedIn -
    >uk.linkedin.com/in/jamesvinall/
  • What is the annual revenue of the group?
  • I think there is a risk that this bond runs the risk of falling between two stools.

    On the one hand, it is positioned as a new start, hence the limited financial information. However, as a new start 8.25% is not in the right place on the risk / reward spectrum for me personally.

    On the other hand, we have a company experienced in factoring, with wider group guarantees in place, which should be reassuring. Therefore I would like to understand the financial position of the entities that stand behind the guarantees to understand their worth. I am not sure the limited financial information published on factoring to date achieves this?

    So if I can’t understand the worth of the guarantee, I am left having to regard it as a new start (albeit with experience).

    James – happy to stand corrected if I have got this wrong. However, whenever financial information is not published, I am always worried that it is because it is not good. I understand that this is a private company – but it is a private company coming to the market asking for money…..
  • Sorry but the suggestion is incorrect:-

    "According to the Federation of Small Businesses only 3% of UK SMEs use factoring/invoice discounting as a source of business finance, which suggests the industry in the UK is patently not competitive enough."

    1) A good % of SMEs are cash rich, and do not require the use of factoring
    2) The market is very mature & very often a factoring company will target specific industries
    3) As a Financial Controller within an SME business, the number of my customers or suppliers who use "invoice factoring" are very small. (other alternatives are now available)
    4) Increasingly, more businesses send invoices as PDF documents, this has helped getting payment from customers much quicker. The days of telephoning customers for payment are long gone (my dunning is done by emails (using merged templates!).
    5) The days of 60 (+) days end of month payment terms are increasingly becoming rarer (exception of a few industries). Most standardize on 30 days EOM.
    6) Today's factoring companies require good IT systems, together with expert credit management skills & information.
  • Rather old information re this mini bond offer, now in Administration
    https://www.theguardian.com/money/2016/sep/07/investors-risk-losing-8m-in-failed-mini-bonds
    A warning to others!
  • shaunm, well done for your earlier warnings,. your insight was spot on.
  • One organisation which probably "benefited" from the saga, was "Investors Chronicle", I remember "Providence mini-bond" being advertised on more than one ocassion
Sign In or Register to comment.