Compelling Retail Bonds
Workspace Group has joined the swelling ranks of companies issuing UK retail bonds. Speaking to CFO Insight, CFO Graham Clemett extols the long maturity and flexibility offered by the security but warns of black sheep that could yet deliver a blow to the fledgling market.
By London standards, Graham Clemett’s office is far away from the city’s financial district. Lying just outside the underground network’s central Zone 1 on the Northern Line’s Kennington stop, Workspace Group’s headquarters looks much like the companies it provides office space to: clean, modern, no frills. Mr Clemett, the chief financial officer, says the relaxed feeling and personal atmosphere – only 60 of Workspace’s total workforce of 180 are based at Kennington – is a welcome change from his previous job in the heart of London’s financial district, as finance director for Royal Bank of Scotland’s UK corporate banking arm.
But the view from his window is not the only thing that has changed for Mr Clemett. More importantly, while he used to be the one giving money to companies, he now has to ask others to fund him. Here, the landscape is changing too. Joining a growing number of medium-sized companies, predominantly from the financial services and property industries, Workspace Group has recently tapped the retail bond market. Asked about the transaction, the CFO says that “actually, the money got wired into our account just ten minutes ago.” The property developer raised GBP 57.5 million (EUR 71m), translating into an estimated net proceed of GBP 56.4 million, priced at a 6 percent coupon.
The newly opened market for retail bonds is a welcome additional source of funding for Mr Clemett and other UK companies. He highlights the long maturity of seven years and the fact that the debt is unsecured, which make it a “compelling” fit for the company. In fact, the CFO has used the money to replace a previous bank facility, which was secured, unlocking a range of properties for more flexible use.
Although GBP 50 million is not a large chunk of Workspace’s total facilities of roughly GBP 400 million, Mr Clemett insists it was enough to serve its intended purpose of repaying the next facility to come due and test the water for future issues. “The first issue was to make sure we understood the market and met the needs of retail investors,” he says. “Now that we know it’s in the right ballpark we would like to tap it again in the future.” What’s more, Mr Clemett hopes the publicity created by the issue will have beneficial side effects for Workspace’s equity listing as well. “It’s been a real opportunity to tell our story to a broader audience,” he says, citing ads they ran in several daily newspapers as one element of a successful marketing campaign.
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