• Note the 3 current bonds in issue all moved down a per cent or so this morning on the news. Fears of saturation. ?
  • Anybody care to guess what the rate will be ?
  • Guess will be maturity in 2028 and if my guess is correct rate could be 4.75 pct.If i am correct not sure i would fancy it much and keep until maturity but maybe worth a punt for a 2-3 year term.?
    Any other guesstimates out there. ?
  • I, too, think they will go for 10 years, especially given that current maturities are 2 years apart, the last being 2026. However, it seems to me that they would like to raise a lot of money and given that this may be the last opportunity for a while, I think they should start with a 5. Below that a lot of people would be put off and what's 0.25% in the scheme of things? At 5, I would be in - below that, maybe, given rising interest rates.
  • My guess: 4-4.5% for 10 years.
  • According to the RNS statement this issue will be in USD - which is a novelty for the retail bond market. I am sure this is because the majority of Burford's business is in the US (their CEO Chris Bogart is also from North America).

    Interest rates are higher in the US than in the UK. Also as a retail bond in USD would be a novelty there might be a modest coupon premium. I would therefore guess the coupon would be between 5.5-6%.

  • Well spotted - yes this could change things - would be good to have a higher coupon and also a bit of currency diversity
  • Thanks ODRB i missed that completely. Indeed the coupon may well be higher but the forex risk is real given the recent poor performance of the USD and probably continuing to be that way while the administration push for growth and exports.
    Does the USA have the equivalent at the moment of an orderly retail bond market. ?
  • ODRB - I've re-read the 10/1 RNS a dozen times and cannot see any reference to USD issuance, am I looking in the wrong place?
  • beekey I saw it but I am not sure precisely where. However, I know it is a USD bond - I was on a conference call with the CEO this morning. As to the US having an orderly retail bond market (sussexmade) this bond will be launched/ traded on the LSE ORB (which is the novelty). Other than currency risk and the terms of the bond/ credit risk the two things to remember will be a) As a USD bond it will not be a QCB and b) there may be an issue of US withholding tax. This can be avoided PROVIDED YOU FILL IN AND GIVE YOUR STOCKBROKER A W8BEN FORM. My emphasis because in the past I have forgotten.
  • If it is in USD then there is a lot of FX risk ( exposure ), eg if we bought the bond in USD and GBP strengthened considerably then we would face a capital loss (in GBP) purely on FX rates.
    This can be hedged but you need to know what you are doing and it's not easy and it costs money.
  • Perhaps not for a normal "retail investor", despite being on the "order book for retail bonds". With the United States of America having a clown as their President, anything could happen which could effect the standing of the US Dollar.
    In normal circumstances, with US interest rates rising, one might expect a strengthening dollar.
    Could be worth a small punt?, however with UK investors having the FX risk, one would hope to receive a good coupon rate as compensation, plus the fact interest rates are higher in the USA.
    Could be a very interesting issue, look forward to receiving more detail at the launch date
  • Consider for example that the Coupon is 5%, I would predict that the USD/GBP FX would move more than 5% in one year, so the total profit or loss is likely to be more driven by FX than Coupon, naturally if the bond is cheap then it could quickly rise in price post issue which which is a factor in the first year, but not after that.

  • Just a thought.., it might be that a USD issue is more targeted at institutions, who have no problems with USD bonds.
  • If it is a US Bond, is it ISA able
  • I would think so, I used to hold the USD Enq bond in my SIPP (-nice to see ENQ coming good now), however I had to execute an FX , ie sell GBP, buy USD, then buy the bond, Redmayne Bentley was my broker. Barclays would'nt do it at the time, so it might depend on the broker, ie you need to ask, but I don't think there is a legal barrier.
  • Ps. I also got my coupons payments in USD.
  • so you need an ISA account capable of holding USD..
  • Ps. you won't get a mid-FX rate so that is an extra cost to consider.
  • Could debatably have slight hedge in so far as if GBP rises then inflation be lower and gilt curve flatter verses th opposite effect
  • Brexit will be the main driver of FX IMHO.
  • Paddy, thats what meant ie slight hedge, yes brexit near term, corbyn after. Works both ways ie if GBP tanks then will get fx profit but loss on yield curve
  • Maybe, you can never rely on expected correlations, FX is very multi-factored. I think having some FX risk in a portfolio is ok under normal circumstances, but I feel GBP is a 5-10% undervalued at the moment.
  • And now something more to consider- in todays Times Business Section an article about another litigation finance firm being Vannin Capital possibly coming to the market but not sure yet in what form. If they issue in the form of shares initially rather than bonds well just look what happened to Burford shares and now about 1000pct up i believe from IPO. So does the investor have room in either equities or bonds and if so could we/should we 'play' both Burford and or Vannin. ? Early days i know but if it happens will this dampen the enthusiasm for Burford given its current unique place in the market. ?
  • The past can also provide what can happen to Litigation finance companies, namely Juridica, look at LSE ticker code JIL, and see the share price over the past 5 years! Not good
  • Thanks Shaunm and cripes Nov 2014 £1.50 down to £0.105 today, now that really is the flipside to Burford.!
  • Just thinking about Carillion, they expanded way too fast, then a few big projects went wrong. I think when I company expands aggressively it is a roll of the dice, with director and equity holders with more upside than the providers of finance.
  • Yeah, I was thinking about my Carillion shares yesterday morning !!! (and the previous 5 months too)
  • I suffered a similar fate with Marconi many years ago, again due to over expansion.
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