14th Jan

Paragon Gets ORB off to a Perfect Start in 2014 as UK Inflation hits 2% Target

Britain's largest specialist buy-to-let mortgage lender and consumer finance group Paragon has issued the first retail bond of the New Year with an eight-year product offering a coupon of 6.125%. 

This is the second retail bond from the company, following its successful issue in February 2013 – (ParagonTempts the Market at 6% - Retail Bond Expert February13th 2013) 

Nigel Terrington, chief executive at Paragon, believes the business has been expanding well and is optimistic for its future prospects, saying: “Paragon delivered strong growth in 2013, surpassing £100 million of profit for the first time in the Group’s history. 

Enhanced Funding

‘In the past year our lending was up 90% on the previous year and we invested nearly £100 million in the buying of loan portfolios,’ he explains, adding ‘The property market is healthy but alongside that we have increased our overall financial capacity through enhanced funding.’ 

Mr Terrington said that the company was also making good progress with its plans to establish a bank and return to consumer lending during 2014. The group posted record profits of £105 m in its end of year report, which was published in November 2013. 

The new issue will pay a coupon of 6.125% semi-annually in arrears, on 30th January and 30th July each year until maturity in January 2022, with the first coupon paid on 30th July 2014.  

The minimum initial subscription is £2,000 with further purchases in £100 increments, and the planned closing date of the offer is 27th January.  

Increase on Previous Coupon

This is an increase on the 6% coupon offered last February which, according to Terrington ‘reflects that all long-dated interest rates have gone up’. 

The previous issue raised £60 million and such was the demand that it closed four days early; Terrington says that no target figure has been set for this second issue, but suggests a similar figure ‘is in our minds and would be a good target level to get to’. 

Paragon is a FTSE 250 company with £10 billion of assets under management. The launch comes hot on the heels of good news for retail bond investors from the Treasury which confirmed that the rate of inflation as measured by the Consumer Price Index had slowed to the Monetary Policy Comittee’s (MPC) target of 2% in December – the first time it had done so in more than four years. 

Inflation accelerated as much as 5.2% in the autumn of 2011 before falling back towards the target, prompting calls by some for the MPC to tighten monetary policy. 

The recent decline in the inflation rate could mean the Band of England keeps interest rates at their record low of 0.5% for longer. 

Chris Williamson, economist at Markit, said: ‘The easing in price pressures is a welcome relief to policy makers at the Bank of England and helps keep the spectre of higher interest rates at bay. Low inflation allows monetary policy to remain loose in the face of faster than expected economic growth and plummeting unemployment.’ 

Some analysts predict further falls as inflation abates across developed economies.    

So, will Paragon’s 6.125% be enough to tempt you to invest, or are you inclined to answer the siren call of strong equity markets? 

Currently the pink pages’ acronym of choice, you may decide to look to the MINTs* with a whole new investment perspective. 

* Mexico, Indonesia, Nigeria & Turkey

Mr Bond invites you to share your thoughts about the current issue and to discuss your strategy for the year ahead – together we really are stronger.       

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