Burford Capital Limited



  • I already hold the 6.5% maturing 2022 which currently has a running yield of 6.28 and YTM 5.847 so I'll pass on these - not attractive enough to compensate for the longer duration, would have needed this one to also be 6.5% to make it worth adding or selling some of my existing holding to fund a purchase
  • Have just placed my order with Selftrade (One of the Offerors) - if the last 2 ORB issues are anything to go by, these may well fly off the shelves even quicker.

  • Looks on side of slightly stingy to fairly priced to me, could they not have managed 6.25%? First issue has traded down and before recent start of year sell off was around 106 and looked nice as a non-market correlated, non-property high coupon issue.
    Share price has more than doubled since last issue if I remember correctly, which provides some comfort and Woodford is a major holder. I might be wrong but I thought it was around 135p last time for the 6.5% 2022, now it is 276p. However, having said that I do not want to look at what the PMO share price was when I bought that issue! Also, I remember Terry Smith giving his 3 investment criteria and one of them being he avoided companies with lumpy earnings, which this definitely is, although it must be nice to have a natural exit ie judgement. Finally, these type of investments do not necessarily run smoothly, just look at Juridica which was also mentioned in this thread back before the first issue in July 2014.
  • Not easy to decide how this one will go, much higher risk than recent issues. As Pdepp indicated Juridica is a disaster see http://otp.investis.com/clients/uk/juridica-investments/rns/regulatory-story.aspx?cid=319&newsid=691789
    The current bond already takes 4% of my portfolio, therefore not keen to risk any more.
    With current bond yielding 5.847%, 6.125% does not compensate for the additional 2 years duration. (like Paragon, existing bond offers less risk!)
    Pdepp, as you say they should have offered it at 6.25% to ensure it goes smoothly.
    Look forward to reading Oliver's write-up, before making final decision (but only be a smallish application, if any)
  • Put my order in - as dont want to miss it if it closes early. Their revenue is lumpy but I think they have earned the right to shave a fraction off the coupon with strong performance in recent years, plus rate expectations have deteriorated since the last issue
  • Rang Interactive Investor who said they were not participating in this issue.

    Bit strange as I cannot remember them ever not taking part in a listing, and certainly they have never missed a bond since the formation of the ORB. - Anyone else with iii and if so have you been informed to the contrary ?
  • Too much credit risk here; this is in essence unsecured debt by a private company. If they are truly that profitable they should not need the funds or, at the very least, be able to borrow from banks at considerably better terms. Feel more comfortable with Tesco 6% , Aviva 6.125% or Paragon, all yielding around 6%.
  • ArthGoch - Interactive Investor are participating in the issue, check the New Issue /IPO tab it is now showing there.
  • Thanks Bonds R us - Also as this morning they are advertising this on their front page.

    Talking to the monkey and not the organ grinder comes to mind :smile:
  • AJBell are also participating, but, as with the last bond, they don't seem to actually advertise the fact.
  • iDealing.com not offering. Shame as that's where my ISA cash is currently residing.
  • Am I correct in reading the prospectus in that the company can recall the bond at PAR at pretty much any time?
  • No, page 39 of prospectus includes
    The Issuer also has a right to redeem the Bonds early at its option at any time. In this case, you will receive back a minimum of the principal amount of your Bonds plus any interest accrued thereon until the date of repayment; in certain circumstances you may receive a higher amount of cash compensation for the loss of income you would have received had the Bonds remained outstanding. On repayment, such payments will be made to you equal to the higher of the principal amount of the Bonds (£100 per £100 in principal amount of Bonds) you hold, or a price whereby the yield given up as a result of the Bonds being repaid early will equal that of a bond issued by HM Treasury of comparable maturity plus a margin of 1.00 per cent., together with any accrued interest. For example, as the Bonds have a fixed interest rate of 6.125 per cent. and mature on 26 October 2024, if the Bonds were repaid on 26 April 2017 the cash payment would amount to £126.05 for every Bond issued at a principal amount of £100.

    ie higher of 100 par or UK gilt plus 1% yield (say 1.5 + 1) which is a lot higher
  • Another good Bond of the week article from Oliver today. Thanks for that
  • One thought crossed my mind reading bond of the week. Sounds like large proportion of cash will be deployed in us so in $. So if sterling gets whacked on a brexit will that help the bounds as the $ s will be worth more. Not sure normal currency fluctuations would matter that much but if we suffered a big devaluation it might. Just interested to hear people's thoughts
  • pdepp - Thanks.

    What is defined as "in certain circumstances"? Seems a little nebulous - under which circumstance a bond holder gets this call-premium??
  • Isnt the ability to buy back at par fairly common - or is this worded especially different?
  • That's not my understanding DavR0s.

    Indeed that's one of the key reasons why bonds trade up at all after issue - to reflect an "improving credit" which effectively means lower resulting yield. That is to say - if the credit of a company improves over the life of its bond, in theory it can refinance existing bond at a cheaper coupon than existing bond's coupon. However, if the company is unable to buyback at par prior to maturity or a set call date, the bond price will appreciate to reflect an improving credit profile / lower risk profile. This is the upside that bond investors are seeking to get a total return in excess of just the coupon.

    This is an important point. My understanding is that most retail bonds are non-callable till maturity, thus have a decent potential for total return upside. That's why, for example, the LSE 4.75% 2021 bond is now trading at 111/113 (or 2.4% / 2.3% yield). If LSE could refinance these at par at any time, these bonds would never approach those prices - the company could theoretically recall those bonds at par and refinance them with a new bond of coupon close to 2.4% - thus saving itself 2%+ on coupon payment per annum.

    I confess that I have not yet read the Burford prospectus closely - but from what "pdepp" has quoted above, it is not clear if the bond investors do get the non-call premium, and if so, under what circumstances.
  • I believe pdepp is correct - the bond would have to be called at around 126p-128p for example in the first year.

    The prospectus says it can be redeemed at "100% of their principal amount or, if higher, an
    amount calculated by reference to the then current yield of the United Kingdom 2.75% United Kingdom Government Treasury Stock due 2024 plus a margin of 1.00%"

    Given that 2024 treasury currently has a yield to redemption of 1.26% adding 1% gets to 2.26%. For the Burford bond paying a 6.125 coupon to yield 2.26% to redemption it would have to have a price around 128p i.e. pays 6.125p each year and has a capital loss each year that gets the redemption yield down to 2.26% overall.

    I believe the principle above is right but needs a financial calculator to get exact numbers
  • They have just RNSs to say that the offer size will be at least £75m so looks like it is going well. Hopefully that will push a few to join the offer and they can close early
  • Ticker Code BUR2
    Small premium this morning
    Price (GBP) 100.60 Var % (+/-) +0.00% ( 0.00)
    High 100.70 Low 100.30
    Volume 83,000 Last close -
    Bid 100.30 Offer 100.90
    Trading status Regular Trading Special conditions NONE
  • New issue ?

    'Burford Capital PLC.... announces that it has appointed Peel Hunt LLP to arrange a series of meetings with fixed income investors in the UK and Channel Islands. A sterling bond issue may follow subject to market conditions and pricing'

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