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I read/watched with interest your material on Retail Charity Bonds https://goodmoneyguide.com/investing/retail-charity-bonds/
I am trying to assess how risky the investments are. One question I have is how the charities raise the money to pay back the principal. Do they just issue new bonds ?
If you are able to point me to further information, I’d be grateful. The RCB website does not seem to address this matter – indeed, as a private investor, I was not sure who to approach in RCB.
Thanks for your question. Mark Glowrey, Director of Fixed Income Sales at Allia C&C has provided us with the below:
Allia C&C are lead managers of the RCB program and whilst we are unable to provide investment advice or predict future events we can provide some insight on the likely behavior of the borrowers.
As your reader rightly surmises, many of the charities issuing bonds will look to refinance the debt on or before maturity. This has already happened with one issuer, Golden Lane Housing, who issued the first bond on the program in 2014. When the bond matured in 2021 the first bond was repaid from proceeds from newly issued ten-year bond.
Other issuers may choose to re-finance the debt via further bond issuance. Many of the issuers run balance sheets with multiple lenders such as banks, and may chose alternative methods of refinance (largely subject to the relative cost of debt). In some cases, the debt may be repaid from retained earnings.
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