THE owner of Eddie Stobart has followed Tesco Bank, Severn Trent and National Grid in tapping private investors for cash through the retail bond market.
Carlisle-based haulage firm Stobart, which operates around 2,500 trucks across the UK and Europe, is looking to raise £25m through its six-year bond, which will offer investors an interest rate of 5.5%. The group follows a recent spate of retail bond launches from UK companies as firms look to raise money from private investors as an alternative to the traditional institutional investor market.
Tesco Bank, which has offices in North Tyneside, has launched a series of retail bonds, while smaller companies have also jumped on the bandwagon, with luxury boutique hotel booking company Mr & Mrs Smith also announcing earlier this year it was seeking to raise cash from the retail market with a fixed rate bond.
Retail bonds are increasingly seen by firms as a cheap form of finance at a time when investors are also searching for better returns as savings rates remain low. Mike McCudden, head of derivatives at Interactive Investor, said: “With most methods of saving yielding such poor returns right now – you’re lucky to get 2.5% in the best cash ISAs – private investors see the bond market as an attractive proposition.”
But while retail bonds are proving to be popular with savers, they are not covered by the Financial Services Compensation Scheme, which means capital invested is not protected and can be lost if the company goes bust.
Stobart, whose trucks are a common sight on Britain’s motorways and have featured in a Channel 5 documentary series, said the money raised from its retail bond will be put towards a number of projects, including plans to develop Carlisle Airport. The group’s Stobart Air division, which bought Carlisle Airport in 2006, plans to invest further in its other airport at London Southend Airport.
Its retail bond, which is to remain open until November 27, will pay a fixed rate of 5.5% a year, paid in half-yearly instalments.
The launch comes as Stobart battles against sliding profits, reporting a hefty fall in underlying profits to £13.2m for the six months to August 31 from £16.4m a year earlier. The group employs more than 6,000 staff.