BlueZest 5.25% 2022 Bond

I have just noticed that Selftrade are offering the above bond (from 27 November, closing 12 December). Although representing a slightly better rate than we have been seeing recently the downside would appear to be that they are looking to be traded on the OFIS (Order book for Fixed Income Securities) rather than the ORB. Any thoughts regarding illiquidity risks, etc.?
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  • No past history, new organisation
    Suggest any potential investors review past Directors activities on Companies House etc
    https://beta.companieshouse.gov.uk/help/welcome

    Not for me, already have enough property investments!
  • Thanks, Shaunm - Interesting reading! I think I have enough as well!
  • fintech seems a game for younger folks, too much experience at the top might not be too desirable

    https://www.mortgagefinancegazette.com/market-news/new-online-mortgage-lender-prepares-for-launch-12-08-2016/
  • Arjungaur, thank you
    Very interesting re your link, in that 2 of the founders worked for Experian.
    Guess what, currently Experian don't give the new operation a very good credit score!
    More importantly those, seeking finance though a 5.25% bond for a new startup must be bonkers!
    Should be solely "Equity" funded, perhaps the founders should have re-mortgaged their own properties!
    Also very surprised that AJ Bell (YouInvest) are participating in this offer!
    Talk about "Junk bonds", I thought they only existed on the other side of the pond (USA)
  • Looking at prospectus, its 1.5bn bond issuance program with first 250mm over next 12 months, so they are trying to build mortgage book using this funding

    Page 4 presents accounts for the parent 'Unique Funding Limited', 850k investor funds, 250k current balance, this looks like the parent company equity funding

    page 7 says Security in the bond comes from underlying mortgages backing it and AmTrust MIG (Mortgage indemnity guarantee) policy

    How does above sound compared to existing or emerging mortgage providers
  • Just for the record, wouldn't touch this with a barge poll, established players with a solid track record and some diversification are ok, but not this, wouldn't be surprised if it got pulled like Select Property Group.
  • Not only that but look at the ARRANGER AND INITIAL DEALER, Monsas Limited, est 2016, give me strength...
    Regulated in Jan 2017
    https://register.fca.org.uk/ShPo_FirmDetailsPage?id=001b000003TDqx4AAD
  • edited December 2017
    I have not had a chance to read the prospectus yet - this weekends' pleasure - but the info pack on the website
    http://www.bluezest.com/bond-investors/
    makes it clear this is secured on BtL Mortgages to professional landlords akin to Paragon
    clear risks as a start up (driven by ex-PE and IB folks) but interesting retail way into this sector and a big premium to similar institutional issues which may make it worth looking at (as someone who issues RMBS in the day job)
  • Don't want to spend too much time on this, but when the investors hand over the cash it's not secured on anything, as opposed to for example refinancing existing debt, this really isn't the time to start a new venture in this market.
  • I don't have time to follow this up and am not sure who I would complain to, however surely there should be some control over the quality of bond offerings. We are back to the days of the Wild West. Advisers are making large fees out of issues unlikely to succeed.
  • Gliderpilot, I am curious to know, what your is complaint? Also, which advisers make large fees from failed deals? That sounds like a poor business model to me. Many (but not all) of the offerings in the mini bond market do seem to be like the wild west, I agree, but UK listed retail bonds can only be offered after rigorous regulatory checks for process and standardisation of documentation. This means there is tight quality control governing the manner in which the bond is offered, and the ORB/OFIS listing ensures you have detailed professional information available from which you can make an informed decision alongside professional investors. If you do want to complain to the authorities, complain about the fact that regulations allow you to buy shares of any company, in any size, of any risk, but for bonds, many good names are only available in denominations of 100k or more. Until then, be thankful that some issuers and advisers take the time and effort to make their offers available in retail sizes. Investors then have sufficient information to decide what is suitable for their own portfolio, and risk appetite, and whether the price is right for that risk. This latest offer is supported by weighty documents (which I have not yet read fully either) and Elmir, above, makes a good point. Plus the bond carries some interesting features (eg a degree of insurance) to provide a level of safeguard to the issuer and investors. At 5.25% 5 years, paid quarterly, I think it is worth taking a look at the docs?.. and if you still think it's from the wild west, you don't have to buy it.
  • I can see they have ineffect created Core capital from some of the bond money by the insurer being paid to cover that risk, But as an example Nationwide CCDS trades at 6.5% and I know which of the 2 I prefer on risk let alone the extra yield
  • how about somebody tells the BlueZest CEO to come or send someone to answer our queries here, then we can give him some of our hard earned money
  • edited December 2017
    okay, i sent in a message, let's see if they get time to come on help us with these queries

    ---------- Forwarded message ----------
    Date: 3 December 2017 at 14:06
    Subject: BlueZest 5.25% 2022 Bond
    To: [email protected]


    Hi,

    Our group was contemplating investing in this issue, however there are some outstanding question maybe you could help us with, pls do reach out on the discussion page -

    https://www.fixedincomeinvestor.co.uk/x/forum.html#/discussion/467/bluezest-5-25-2022-bond

    Thanks vm,
    Fixed Income Investors
  • Except for product coverage, couldn't find out whole much on difference between OFIS and ORB, seems like product offering for retail vs institutional -

    http://www.londonstockexchange.com/traders-and-brokers/security-types/debt-bonds/debt-bonds.htm
    http://www.londonstockexchange.com/traders-and-brokers/security-types/retail-bonds/retail-bonds.htm
  • edited December 2017
    Rob should be here soon, or you can reach out directly and post it here for the rest of us

    Begin forwarded message:
    From: Robert Ainscow '[email protected]'
    Date: 4 December 2017 at 09:25:12 GMT
    Subject: Bluezest.
    Dear,

    My name is Robert Ainscow, I’m the Director of Funding for BlueZest, and responsible for the BZSRB.

    Thank you very much for your for your email, we have noted the groups interest and I have signed up to the forum, but am having issues with the sign-in process which I have asked fixed-income investor for help with.

    Hopefully I will be available to answer questions later today.

    Rgds.

    Robert Ainscow.

    Get Outlook for iOS


  • edited December 2017
    is it possible to delete a comment
  • Re OFIS and ORB, one difference I know is that it in my experience (ie Ladbrokes), there are Market Makers on ORB that are obliged to quote a buying and selling price, on OFIS I needed my broker to find another investor willing to sell the bonds I was looking to buy (which took a few days). There are other differences as well, I'm sure, I would expect ORB would have tighter regulations to protect retail customers.
  • Dear Forum participants,

    Firstly, I have to make clear that BlueZest are not providing investment advice to any potential investors in the BlueZest Secured Retail Bond Programme Issuance, it is important for potential investors to seek advice from their own advisors. Secondly, it is important to read the Information Booklet, the Programme Prospectus, and the Final Terms for Series 1, which set out the terms in their entirety.

    I have tried to collate questions from the forum’s string:

    1. Equity for the establishment of the BlueZest Group, its working capital, its mortgage platform and the establishment of the BlueZest Secured Retail Bond Programme has been provided by the Investors and Directors of the BlueZest Group’s parent company, Unique Funding Limited. This currently represents a cash investment of more than £2.5m. Details around the BlueZest Group and its background can be found in the Information Booklet and Section 7 of the Prospectus

    2. BlueZest intends to issue Series under the Programme, in varying sizes, frequently and in line with the growth of its pipeline of mortgage applications. Cash proceeds from each Series Issuance is retained in the Transaction Account at the Account Bank (described in Section 12 of the Prospectus) pending it being released to BlueZest for mortgage completions as they occur. The Cash released from the Transaction Account create Advances under the Loan Agreement (represented in Appendix F of the Prospectus) between BlueZest Secured Retail Bond PLC and BlueZest Mortgages and Loans Limited, the mortgage lender. The Security that is delivered to BlueZest Secured Retail Bond PLC under the Loan Agreement is described in Section 13 of the Prospectus and includes the transfer of the equitable interests (ultimate ownership) of each mortgage loan and the rights and benefits, of any payments made under Mortgage Indemnity Policy with AmTrust.

    3. The Loan Agreement contains an Asset Coverage Ratio and an Interest Coverage Ratio which are tested prior to each Series Issuance.

    4. The Mortgage Indemnity policy is described in Section 9 of the Prospectus.

    5. The London Stock Exchange explained to BlueZest that there is no difference in operation of the OFIS and ORB platforms for Retail investors. ORB is for “Vanilla” corporate Retail Bonds, and OFIS is where Programmes with structured security are placed in expectation of institution/wholesale participation. Both platforms require Market Makers. BlueZest confirmed with its Market Makers and with the Authorised Offerors prior to establishing the Programme, that they were able to function on OFIS as well as ORB.

    Rgds.

    Robert Ainscow.
  • Robert, many thanks for information
    We appreciate your input to the forum and hope the fund raising is successful

  • Paddy - thanks for that - indeed, some decent research
  • edited December 2017
    Re: http://www.adventurousinvestor.com/420-steer-clear-of-the-bluezest-retail-bond

    The author doesn't want issuer to wander up the risk curve to chase new business, however wants to get paid a fatter coupon, maybe BlueZest should bring out their magic wand.
  • agreed, I don't think the economics would work if BlueZest had to pay a fatter coupon, I just think BlueZest have missed the bus on this one.
  • Not spent much time on this but could someone who has please comfirm if the bonds will be the only borrowing source the company makes ?
  • yeah, for now at least, looking at prospectus, its 1.5bn bond issuance program with first 250mm over next 12 months, so they are trying to build mortgage book using this funding
  • Dear Forum participants, the article below has been amended:

    http://bit.ly/2iEdf9h

    Further corrections are being sought, in particular the intended size of the first issue, which is incorrect in the article. The figure mentioned in the article is the intended total issuance over the first 12 months of the programme.

    Regards, Robert Ainscow
  • Thanks arjungaur. So if no other cheaper higher ranking borrowing then that means they need to lend 70% LTV at 5.25% plus insurance and overhead costs. Doesnt sound competitive to me
  • edited December 2017
    yes, it's not competitive compared to banks who can take those mortgage assets and get funding from the central banks at zero. However, banks could be behind in using tech when it comes to extending credit to those who can still afford to borrow at 5.25%+. Would be curious to hear on how Lendinvest makes it a viable business model.

    Good to see @ainscowr trying to correct information about their new issue. Speaks well for the dedication from BZ team.

    @paddy on missing the bus > is that because it's too late in the economic cycle or is their 1.5bn target size too big maybe
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