A long-awaited change in rules allowing sterling bonds under the £100,000 threshold to be issued under the same regulatory regime as wholesale bonds will arrive in the new year.
The theme was discussed at last month’s ACT’s Tomorrow’s Treasury event in the City of London, in a session called ‘Evolution of funding options’ facilitated by Fiona Crisp FCT, past president of the ACT.
Nicholas Smith, managing director, capital markets, RetailBook, said: “Listed companies in the UK will be able to issue low denominations and attract retail capital at the same time as institutions.
“This reflects a theme that not just the business community in the UK, but also the government and the FCA have been banging the drum on to get retail investors more involved in the market.”
It’s about trying to get some of the capital that’s currently sitting in bank accounts deployed into the economy...
Smith said RetailBook, which connects retail investors with public companies, had undertaken retail deals for FTSE-listed companies for the past few years. As an example, he cited how it had played a key role in bringing retail investors into a £2bn fundraising by utility SSE (Scottish & Southern Energy) last month.
“It’s about trying to get some of the capital that’s currently sitting in bank accounts deployed into the economy, and the effect that can happen as a result,” he explained. “In the US, we see a very resilient market, because there’s so much participation from everyday people to get involved and help drive growth.
“It’s the opposite of private credit, where there is one counterparty; in some cases, it is bringing thousands of people into deals.”
To exclude capital sitting on platforms for the “DIY type of investor”, such as the £170bn of capital sitting within the infrastructure of Hargreaves Lansdown, is “not constructive”, Smith added.
Asked by Crisp which relatively new funding option is going to be of greatest importance to treasurers, James Ranger, managing director, head of debt solutions, Lloyds Bank, said: “The growing private credit option will come in different shapes and sizes to what we may have traditionally sourced through banks or the capital market.
“If you look forward three, four or five years, there’s probably going to be much less differentiation between a private credit provider and banks raising their own funds. You will see banks that are partnering with private credit to deploy in combination with them and you’ll see banks bridging into private credit. You will also increasingly see deals where private credit is crossing the boundary and acting in the bond markets as well.”
... in some cases, it is bringing thousands of people into deals
Nicholas Smith, managing director, private credit, AIMA (Alternative Investment Management Association), said a big trend will be a streamlining of relationships between banks and treasurers when it comes to new funding options: “It’s going to make life a lot easier for treasurers generally, in getting from A to B in terms of funding they want.”
Lawrie Holmes is a business and financial journalist
