5th Nov

A Loan Again, Naturally? IPF Seeks to Repeat 6.125% Retail Bond Success

International Personal Finance launches second tranche of its BB+ rated, seven year retail bond.


Following the success of its initial foray into the retail bond market (IPF Retail Bond Closes Early at Top End of Expectation – Retail Bond Expert - 23rd April 2013), doorstep lender International Personal Finance (IPF) has announced a further issue of its unsecured seven-year retail bond.

Paying a semi-annual coupon of 6.125%, the latest issue will be consolidated with the £70 million raised earlier in the year and both will mature on 8th May 2020.            

Describing itself as a ‘home credit service’ for people ‘who want to borrow money quickly and in a manageable and transparent way’, International Personal Finance operates in Poland, the Czech Republic, Slovakia, Hungary, Mexico and Romania, and offers short-term cash loans of £50 to £1,000 as well as a home collection service; the company has recently expanded into Bulgaria and Lithuania 

IPF is FTSE-250 listed and was floated on the London Stock Exchange in July 2007 after it demerged from Bradford-based Provident Financial, which raised £120 million with its own retail bond in April 2012.  The company has 2.4 million customers and more than 6,000 employees. 

Gerard Ryan, Chief executive officer of IPF, says the additional issue is ‘another step forward’ in the company’s ‘strategic objective of diversifying funding’. 

Increased Liquidity

‘Our retail bond this year was heavily oversubscribed and re-opening this bond issue gives investors who missed out another opportunity to invest,’ says Ryan, adding that the second issue will also bring the added benefit of increased liquidity. 

IPF made a profit of £91.5 million in the last financial year, and whereas its share price was in the region of 430p at the time of its original issue, yesterday (Nov 4th) its shares were trading up 2.9% at 600p. 

The issuer has a long term credit rating of BB+ with a stable outlook from Fitch and the ORB-listed retail bond offer is open to investors until 15th November, although it may close earlier if there is high demand. 

The minimum investment is £2,000 with further purchases available in multiples of £100; the funds raised will be used for general corporate purposes. 

In April the initial offering raised £70 million against the company’s expectation of £50 million, and at the time Ryan said “I am delighted with the success of our retail bond which saw the offer period close early today due to very strong demand.“ 

Robust Strategy

Clearly the attractions of a growth business with a robust strategy combined with a decent set of terms on the bond found significant favour in the market.   

'The retail bond not only lowers the cost of our funding, but gives us funding diversification with a longer maturity; good news for the business, our people and our shareholders,' said Mr Ryan.   

Analyst Eric Burns at WH Ireland said 'the closing of the issue a full week ahead of the original schedule highlights continued strong retail interest in the corporate bond market.'   

This is hardly surprising given the low returns available elsewhere but, as ever, investors need to look beyond the coupon to the covenant of the issuer and, as ever, Retail Bond Expert recommends that those considering an investment should ensure that they are in possession of all the facts regarding where the bonds sit in the debt capital structure of the company they are lending to, what protection they are afforded, and if they are in any doubt should seek professional financial advice.    

Because of the nature of the issue and its consolidation into a single series, Retail Bond Expert has learned that not all distributors that participated in the first issue will be able to support the new tranche, and would-be investors should check that they are able to add to their investment should they wish to do so. 

The latest issue is offered at a price of 100.75, to include thirteen days accrued interest of 0.22 per £100 nominal; this is equivalent to a ‘clean price’ of 100.53, which gives a reduced yield to maturity of 6.02%.   

The nature of this issue represents a further chapter in the development of the retail bond market in the UK and Retail Bond Expert would welcome feedback from those choosing to participate, or indeed being excluded from doing so because their existing broker has been unable to support it. 

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