Rugby club Wasps launches 6.5% retail bond
Invest in the rugby club and you could pocket a big return. But is your money at risk?
Rugby union club Wasps, which also owns the Ricoh Arena stadium complex in Coventry, has become the first sports club to issue a retail bond on the London Stock Exchange.
In an effort to raise between £25 million and £35 million the club has created a seven-year retail bond paying a 6.5% annual return.
What is a retail bond?
A retail bond is not like saving your money in a bond from your bank or building society. Instead you are basically lending your money to the firm offering the bond. You'll then get paid a return on your investment at certain intervals over the life of the bond, with the full amount returned to you at the end of the bond's term (if all goes according to plan, anyway).
For more on how retails bonds differ, read Beginner's guide to bonds.
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Where your money is going
The announcement of a retail bond is the next step in a mission to bring the Wasps rugby team back to glory. It was the last English team to win the European Cup back in 2007, but has faced hard times since then. Three years ago Wasps nearly went out of business, but was saved by Irish businessmen Derek Richardson.
Last October the team bought Coventry’s Ricoh Arena which is a 32,600-seater stadium, and relocated its home games there from Adams Park in High Wycombe. The purchase has brought additional revenue streams in as it also hosts concerts and exhibitions, and includes both a 121-room hotel and a casino. In the four months since December attendances at rugby games have tripled to an average of 18,569 per match.
Earlier this week vice-chairman Nick Eastwood announced that Wasps would soon overtake Toulouse as the rugby club with the biggest turnover in Europe at more than £21 million. It is hoped that this money can be used to draw in star players to help get the team back to the top of the tables.
The money will also be used to pay off existing loans.
Enjoy tax-free returns on your investments with a Stocks & Shares ISA
How the bonds work
Wasps Finance plc has been set up to issue the bonds, which will be guaranteed by the two key operating companies, Wasps Holdings and Arena Coventry Ltd. The money is secured against the Ricoh Arena stadium.
The minimum initial investment is £2,000, with the bonds available to be bought and sold in multiples of £100 after that.
Interest will be paid on 13th November and 13th May each year, with the initial investment due to be paid back in full on 13th May 2022.
Trading of the bonds is expected to start on 14th May on the order book for retail bonds on the London Stock Exchange. You can also put your investment into an ISA. so your returns will be tax free.
Should you invest?
An annual return of 6.5% over seven years is very appealing as it absolutely trounces anything you can get in a traditional savings account. Anyone investing for income may want to look at the Wasps retail bond in more detail.
But before you pile in remember that money invested in retail bonds is not covered by the Financial Services Compensation Scheme. This means that if the club went bust you could lose your entire investment. There have been high profile retail bond casualties of late, such as Secured Energy Bonds, which collapsed in January.
You will also be committing your money for a long time at seven years, although you could unlock your cash by trading your bond on the stock market. This is where the retail bond is a lot more attractive than a lot of mini-bonds that have hit the market in recent years. A mini-bond is not traded on the stock market so you are stuck with it until it matures.
Another thing to consider is that you are relying on one company; you may be better off spreading the risk by going for a bond fund instead.
Enjoy tax-free returns on your investments with a Stocks & Shares ISA
More on investing:
Beginner's guide to picking a high income fund
Record Tesco losses: what next for shareholders
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