The Downing Crowd platform has announced the launch of new “Regular Access Crowd Bonds” designed to offer attractive returns with a certain level of liquidity for investors.
Unlike existing Crowd Bonds, investors in Regular Access Bonds will not have to invest their money for a fixed period of time. Instead investors may access their funds, with sufficient notice as outlined in the Offer Document (subject to liquidity), during the maximum 10-year term of the Bonds. Downing Crowd explains that a fixed amount of the total value of each Bond, labelled a ‘Tranche’ or ‘portion’, is intended to be released on a regular basis. Interest rates will be fixed for each Tranche.
“Our new Regular Access Bonds fill a neglected gap in the investment market. We would never suggest that this type of Bond is directly comparable with cash savings as it is higher risk,” explains Downing LLP Partner and Head of Crowdfunding, Julia Groves. “However, it could prove an attractive option for those ‘extra pots of money’ that people often start building to meet certain types of financial goals, so long as they understand the investment and are willing to take on the additional risk. And the option to hold the Bonds in our Innovative Finance ISA wrapper, launched in March of this year, meaning investors’ capital and interest will be sheltered from tax too. As a result, we expect the first Tranches of both Bonds to sell out quickly.”
Groves said the Regular Access Bonds provides a balance between access to an investors money and an alternative to historically low interest rates typically available in bank savings accounts.
The first Regular Access Bond is a £10 million offer to lend money to Bagnall Energy Limited, a UK renewable energy generation and storage company. The business has contributed to over £100 million of UK renewable energy developments since launch in 2013. It currently has a portfolio of over 30 operational projects extending right across the UK renewable energy sector, from solar to hydro projects.
The initial interest rate for the Bond is 3% annually. The preliminary LTV of the Bond – the ratio between the size of the Bond and company value – is said to have been kept deliberately conservative at 10.5% maximum, to help balance risk against the fact that the Bond is not secured against Bagnall Energy’s assets. The business currently has net assets of £95 million and is limited to borrowing no more than 20% of its net assets, to help further reduce risk for investors.
Downing Crowd is also launching a second Regular Access Bond for Pulford Trading Limited, a company with a range of asset-backed sectors including, but not limited to, hotels, leisure centres, data centers and care homes. This £10 million Bond will have an initial annual interest rate of 3% and loan-to-value of 8.5% based on Pulford Trading’s audited net assets of £118.1million.
“One of the really positive benefits of crowdfunding is that it has the potential to make finance more inclusive by reaching customers that the traditional financial services industry can’t (or won’t).” added Groves. “That’s essentially what our Regular Access Bonds are all about and we believe it will provide a unique and much needed opportunity for many investors. We’re therefore expecting both Bonds to be particularly popular and with limited availability of £1 million for each Bond initially, investors will need to get in there quickly to access this opportunity.”
Downing LLP has funded over 100 renewable energy projects totaling more than £400 million worth of investment since 2010 including solar power, onshore wind and anaerobic digestion. The first Tranches for both the Bagnall Energy and Pulford Trading Regular Access Bonds are now open and will close on 31 July 2017 at 9am.
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