New Issue - Charities Aid Foundation (Retail Charity Bond) 5% 2026

The Prospectus can be found on the LSE’s website; the link:

Issuer Retail Charity Bonds PLC for the Charities Aid Foundation
Format Issued by Retail Charity Bonds, secured on a loan to Charities Aid Foundation
Expected Bond Rating None
Subscription Period 22nd March 2016 to 12 noon 6th April March 2016 (may close at short notice)
Settlement 12 April 2016, via Euroclear or Crest
Expected Maturity 12 April 2026 (10 years)
Size TBC but will include Retained Bonds
Coupon 5% p.a., semi-annually in arrears on 12 April and 12 Oct each year
Issue Price 100
Listing Official of the LSE and traded on the London Stock Exchange Order Book for Retail Bonds
Sales Restrictions UK, Channel Islands and Isle of Man only
Denoms GBP 100 (minimum subscription GBP 500)
Joint Lead Managers Canaccord Genuity
ISIN XS1386668591


  • A few initial thoughts.

    5% over 10 years is quite a big ask, particularly given their option to extend 2 years, albeit at an additional 1%. On the other hand, given the lack of new issues and the ongoing low interest rate environment, maybe this sort of offer is reasonable. The biggest worry for me was the lack of an obvious asset that the bond will be secured against. So at first sight it compares unfavourably to the Alpha Plus offering both on duration and security.

    However there does seem to be a lot of protection from the balance sheet, which looks very comfortable (in terms of the net value of the organisation). I was curious about the investments on their balance sheet, but a bit of digging (lots of good detail in their annual reports) suggests these are weighted towards quality, so no worries on that front.

    Furthermore, the covenant and negative pledge are both very helpful here in protecting the interests of bondholders from future changes in gearing and/or capital structure.

    I'm cautious positive overall, but would be interested to hear views from others.
    edited March 2016
    5% for 12yr paper is frankly ridiculous (even if you get an additional 1% for the final 2yrs).
    On that basis alone I shall pass.
  • Times have changed. It may have been ridiculous five years ago but just look at the prices quoted on this site for ORB bonds – between seven and twelve years the average yield is a little over 3%.
    CAF are boring yes, safe very probably. To my mind 5% is pretty reasonable even given the duration.
    edited March 2016
    I'd argue the ORB market is heavily skewed against the retail investor base - there is plenty of asymmetric risk that an ORB investor is being asked to take in this issue simply because of lack of supply.

    Is this bond even rated / going to be rated? No. What's the equity backing this? Who knows. So how does one determine what kind of risk one is taking and whether the 5% is commensurate to the risk being assumed?

    Would you rather buy this or say ICG 6.25% 2020 "BBB-" rate, backed by ~£2bn equity market capitalisation trading at 103.5 ask to yield 5.4%?
    Would you rather buy this or say PAGLN 6.125% 2022, backed by ~£1bn equity market capitalisation trading at 99.7 ask to yield 6.2%?

    To me it is a no-brainer what I would choose.
    IMHO, I think there are better options available out there.
  • Oliver, thank you for the write up, much appreciated.
    I have no problems regarding the financial soundness of CAF, having been aware of the organisation for a number of years. Having worked in the charity sector (Professional body) for 10 years as Finance Manager & Company Secretary their credentials are very good.
    However what I don't like, is the length of 10 years & then the possibility of another 2 years.
    For a "normal retail investor" investing his pension in a SIPP or ISA, this possible "retail bond" investment does not seem to fit. Too low a coupon for the "long term risk", and uncertainty that it could be extended for another 2 years at just 6%. (Valuations say in 7 years could be in the 80s due to expected pickup of future interest rates, just when one may be hoping to sell up! (much greater price volatility than Alpha Plus)
    For an institutional investor no doubt there be a demand, as the risk of default is very very low. (10 year Gilt yields around 1.5%).

    Louis, I agree with your assessment that Alpha Plus is the better offering

    I be passing on this issue, despite having holdings in the two previous "Charity bonds".
    Be interesting to see what they hope to raise, and what the dealing "spread" will be, as I believe the existing spreads are fairly wide (can anybody confirm this?)

    FAO Potential issuers - More standard 7 year maturities please!
  • Thanks Oliver for the research note. I shall place an order. I have invested in most of the ORB new issues including all the 'Charity' Bonds. The main risk is interest rate risk, but I don't see the Bank of England base rate rising above 5% over the next 10 years. At least I shouldn't have to worry about getting my capital back , which is the main risk with the high yielding ORB bonds.
  • Anyone any idea who is offering this issue and if Barclays stockbrokers are?Barclays stockbrokers did offer the last two charity retail bonds but do not appear to be offering this one, at least as of yet.
  • Interactive Investor (iii) is offering it online. Unfortunately, AJBell don't seem to have it, despite offering the recent Alpha Plus bond. Rather annoying since I'm using them for this year's ISA.
  • Oliver, once again thanks for another well researched, well written and extensive write-up.

    I would have very much liked to have purchased a smalt tranche of these butwithin a tax free wrapper.

    Unfortunately, I don't have any funds left from my 2015-6 allowance and am struggling to find something I can sell to make way for these.

    I see these as a good wholesome investment and I don't regard 5% as being particularly parsimonious in this day and age.
  • Anyone know if HL is offering this?
  • I don't think so - the web page for new issues only shows Alpha Holdings 5%, which they have updated to show that it has closed
  • As some of you probably already know, Selftrade are offering this one
  • HL took my order over the phone this morning.
  • AJ Bell YouInvest have it now too
  • Early Closure Announcement - CAF Retail Charity Bond 5% Due 2026

    29th March 2016

    Retail Charity Bonds PLC

    Charities Aid Foundation Retail Charity Bond 5% due 2026

    Early Closure of Offer Period

    Retail Charity Bonds PLC announces that the Offer Period for the Charities Aid Foundation Retail Charity Bond launched on Tuesday 22 March 2016 will close at 15:00 (London time) on 29th March 2016 (the "End of Offer Date"), such time and date being earlier than originally scheduled end to the Offer Period which was 12 noon (London time) on 6 April 2016.

    Retail Charity Bonds PLC will release an announcement constituting the Issue Size Announcement as referred to in the Prospectus dated 22 March 2016 at a time and date shortly after the End of Offer Date.

    Defined terms used herein shall have the meanings attributed to them in the Prospectus dated 22 March 2016 in relation to the Bonds.

  • ..."AJ Bell YouInvest have it now too" ...
    Thanks Beekey! They kept that very quiet! As soon as I saw your post I applied via AJBell, but having just seen the 'Early Closure' post, I may have just missed it.
  • That's good news, hopefully we have few more new issues, but perhaps of a shorter duration
  • Does anyone have any idea when this starts trading and what the mnemonic is?
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