Regional REIT 4.5% 06/08/2024

Please find some complementary research on the Regional REIT 4.5% 06/08/2024 bond.

Regional REIT Limited (“RGL”) is an investment trust listed on the LSE with a NAV of £393m that invests and manages high quality commercial properties predominantly in principal UK regions, outside of London.

We believe this bond offers a safe and simple investment. The interest is covered 3.8 times by the company’s earnings, pretty safe-looking from a bond holder’s perspective.

This makes a timely replacement for holders of the CLS 5.5% 31/12/19, which is being redeemed early on 31st July at a price of around 105%. Holders could therefore buy this new bond at a 105/100 ratio (a holding of 30,000 CLS 5.5% could be replaced with a subscription of 31,500 Regional REIT 4.5%).

The offer period closes on the 1st of August so please submit any order before then. With a coupon of 4.5%, we believe the bond represents good value and may well trade at a modest premium in the secondary market.

Greensleeves Homes Trust 4.25% 30/03/26

Please find some complementary research on the 4.25% 30/03/26 bond issued by care-home provider Greensleeves Homes Trust.

Greensleeves Homes Trust (“Greensleeves”) is a charity that provides care for older people in its up-market residential, dementia and nursing homes across England. The charity is looking to raise approximately £30m to provide the ammunition to buy and fit out further homes. The bonds have a minimum investment of just £500 with multiples of £100 thereafter. The Offer Period ends on 17th March but is likely to close early due to demand.

This new retail charity bond is not secured but in practice the bond holder has the backing of a substantial property portfolio. We believe the bond represents good value and may well trade at a modest premium in the secondary market.

Burford Capital Plc 6.125% 26/10/24

Please find some complementary research on the Burford Capital Plc 6.125% 26/10/24 bond, which is currently in the ‘Offer Period’ before being listed on the London Stock Exchange.
Burford Capital Limited (“Burford”) is the world’s largest provider of litigation finance with approximately 60 staff located in the US and the UK. The company trades on the London Stock Exchange with a market capitalisation of £629m.
The bond does not carry a credit rating but is being issued by a good business with a proven track record of making money. Burford’s 2015 operating profit provides interest cover of 3.1 times, a very comfortable margin
The bonds have a minimum investment of just £2,000 with multiples of £100 thereafter.
The Offer Period ends on 19th April but is likely to close early due to demand. The previous Burford bond rose immediately above par and are now yielding just 5.6%. That bodes well for investors and we rate the issue a strong buy.

Alpha Plus Holdings Plc 5% 31/03/24

Please find some complementary research on the Alpha Plus Holding Plc 5% 31/03/24 bond, which is currently in the ‘Offer Period’ before being listed on the London Stock Exchange.

Alpha Plus Holdings Plc (“Alpha”) and its subsidiaries operate 12 independent schools, 14 nurseries and 4 sixth form colleges. The majority of the schools and nurseries are located in Central London (Notting Hill, Marylebone and Hampstead in particular).

The bond does not carry a credit rating but is secured 1.66 times by a first legal mortgage over a portfolio of high quality properties being operated by Alpha as schools. These were recently valued at £108,820,000 and are predominantly located in Pembridge Square, one of the most prestigious addresses in central London.

The bonds have a minimum investment of just £2,000 with multiples of £100 thereafter.

The Offer Period ends on 23rd March but is likely to close early due to demand. The previous Alpha bond rose immediately above par and are now yielding just 3.7%. That bodes well for investors and we rate the issue a strong buy.

Paragon 6% 24/08/24

Please find research on the Paragon 6% 28/08/24 bond, which is currently in the ‘Offer Period’ before being listed on the London Stock Exchange.
Paragon Group of Companies Plc (“Paragon”) is a FTSE 250-listed company with market capitalisation of approximately £1.3bn. Founded in 1985, it is predominantly a Buy-to-Let specialist with smaller operations in consumer debt and banking.
The bond is senior, unsecured debt of Paragon and contains certain covenants including a gearing covenant and negative pledge in respect of the provision of security and subsidiary guarantees. The issue is rated BBB- by Fitch, making the issue investment grade and indicating that the issue is of good credit quality.
The bonds have a minimum investment of just £2,000 with multiples of £100 thereafter.
The Offer Period ends on 24th August but is likely to close early due to demand. Previous Paragon bonds have risen above par and are now yielding below the 6% coupon offered by this issue. That bodes well for investors and we rate the issue a strong buy.

Intermediate Capital Group Plc 6.25% 19/09/2020

Please find some complementary research on the 6.25% 19/09/20 bond issued by FTSE250-listed specialist asset manager Intermediate Capital Group Plc.

Following its launch last year, the bond has mostly traded above par, reaching at one point a high of 106.5. Having retraced to the 103 level, we believe the bond offers good value, trading on a GRY of 5.7%. With the ordinary shares climbing 57% over the last year, the market obviously concurs that it is a well-run company and S&P/Fitch have a BBB- investment grade credit rating on the issue.

With the general consensus forecasting a long period of low interest rates, we feel that the bond looks good value at current levels.

Stobart Group Plc 5.5% 04/12/18

National Transport Distribution company Stobart Group Ltd is issuing a six year sterling bond with a 5.5% coupon.

Though the issue does not carry a credit rating, we feel this bond looks good value against the 3% and 4.5% GRYs offered by Go Ahead and FirstGroup around the same maturity. With the general consensus forecasting a long period of low interest rates, the issue looks attractive. The senior ranking of the bond combined with covenants suggest that the bond offers a good risk/return ratio.

We are taking orders for settlement until the 27th of November, however we expect the issue to close early due to strong demand. If you would like to purchase some bonds at par (the minimum size is £2,000 and they trade in multiples of £100 thereafter), please register your interest with your stockbroker or by contacting us on 200 75181 or email to dealers@gam.gi.

As a company that ‘actually does something’, the bond offers a good opportunity to diversify from recently issued bonds that have mostly come from the finance and property sectors. Similar issues have traded above par after admission to trading in the secondary market and with a target raising of just £25m, we expect this bond to do the same.

CLS Holdings Plc 5.5% 31/12/2019

Multinational property company CLS Holdings Plc is issuing a seven year sterling bond with a 5.5% coupon.
Though the issue does not carry a rating, we feel this bond looks good value against the 1% offered by the benchmark Treasury gilt. With the general consensus forecasting a long period of low interest rates, the issue looks attractive.
The senior ranking of the bond combined with covenants (see attached) and the steady course steered by CLS’s management through the last property market fall (they sold 40% of the Group’s property portfolio between 2006 and 2008) suggests that the bond offers a good risk/return ratio.
We are taking orders for settlement until the 4th of September, however we expect the issue to close early due to strong demand. If you would like to purchase some bonds at par (the minimum size is £2,000 and they trade in multiples of £100 thereafter), please register your interest with your stockbroker or by contacting us on 200 75181 or email to dealers@gam.gi.
Similar issues have traded above par after admission to trading in the secondary market and with a target raising of just £50m, we expect this bond to do the same.

Provident Financial 7% 04/10/2017 – Buy

Provident Financial Plc is issuing a new 5 1/2 year sterling bond with a 7% coupon, which will commence trading on the 4th of April, complimentary research attached.
Rated BBB by Fitch, we feel this bond looks good value against the 1.1% offered by the benchmark Treasury gilt and the ~3% offered by the average corporate bonds with the same maturity.
With the general consensus forecasting a long period of low interest rates, the issue provides added attraction. The relatively short maturity of the bond will also mean less volatility in secondary market prices. And the senior ranking of the bond combined with the steady course steered by Provident Financial’s management through the credit crunch suggests that the new bond offers a good risk/return ratio.
The Provident Financial 7% April 2020 is priced at 105.7 – a 6.1% yield to maturity. Considering the 7% 4th October 2017 bond is shorter, we believe the bond should trade at a premium to par upon admittance to trading in the secondary market.

iShares Emerging Markets Local Gov Bond ETF

Emerging market bonds have been one of the best-performing asset classes over the last few years and for good reason. They offered exposure to high yields, strong underlying economies and a healthy diversification away from the Western debt crisis.
However, we believe this story has further to run. Inflows to the asset class remain strong and valuations are still attractive on a relative basis. Although outright yields are low with the benchmark 10 year gilt offering just 2.2%, emerging market yields at 6.2% still look attractive.
Please find attached complimentary research on our preferred method of gaining access to this interesting asset class – the iShares Emerging Markets Local Gov Bond ETF. This exchange traded fund trades on the London Stock Exchange in sterling, has a total expense ratio of just 0.5% and currently boasts an index Gross Redemption Yield of 6.7%, with an index maturity of 7.5 years.
With 82% of the fund’s bonds being investment grade, we recommend the holding to medium-term investors seeking fixed interest with a medium attitude to risk