Thursday 10th March – Alpha Plus Holdings plc, a provider of private education which owns and operates independent schools, nurseries and sixth form colleges mainly in London has launched an eight-year 5% retail bond on the London Stock Exchange’s Order book for Retail Bonds (ORB) – the first launch on the exchange since August 2015.

 

 

It is the second secured issuance by the company, and its 5.75%, 2019 bond has traded at a premium on ORB since its launch in 2012.

The minimum subscription is £2,000, with increments of £100 thereafter; interest is to be paid semi-annually from 30th September 2016.

The offer period is due to close on 23rd March 2016; authorised distributors are Interactive Investor, Redmayne Bentley LLP and Barclays Stockbrokers.

Alpha Plus Group was founded in 1931 as Davies, Laing & Dick College and today promotes itself as ‘The Gold Standard in Education’; the company is looking to raise up to £50 million from the latest issue, and the cash will be used for ‘general corporate purposes and to pay down existing debt.’

The Group consists of fourteen schools and nurseries and five sixth form colleges throughout the UK, and is led by Graham Able, previously Master of Dulwich College.

Alpha Plus Group is owned by DV4 Property Fund, a real estate investment fund advised by property investor Delancey. Its portfolio includes Wetherby and Pembridge Hall Schools in Notting Hill, Wetherby Preparatory School in Marylebone and St Anthony’s School in Hampstead.

A retail bond is debt issued by a company, and they have proven extremely popular with investors starved of income and attracted by low minimum investment sizes and the ability to invest in a wide range of different companies.

‘popular with investors starved of income and attracted by low minimum investment sizes’

The latest bond is secured against a portfolio of Alpha Plus’s school buildings and other assets, although Bryn Jones, Head of Fixed Income at Rathbones points out that ‘the buildings they own are schools, getting a change of use to say, flats, would be difficult, weakening the value of the security a little bit.’

Even so, in the current climate, 5% income fixed for eight years will doubtless prove attractive and in the past many retail bond issues have close well before their intended deadline.

It should be born in mind that retail bonds carry the risk that if the issuer can’t pay the interest due or repay the capital, there is no protection from the UK Financial Services Compensation Scheme (FSCS).

 

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