Tesco Bank Retail Bond exceeds target once again
Tesco Bank has closed the book on its second Retail Bond, taking orders of £60 million.
Following the success of its inaugural retail bond earlier in the year, Tesco Bank launched its second retail bond issue, an eight-year Retail Bond, linked to the Retail Price Index (RPI). The Retail Bond will be issued by Tesco Bank on 16 December 2011.
The Retail Bond, which was only available through stockbrokers and wealth managers - and was targeted at investors looking for inflation protection - raised £60 million in only 10 days, despite challenging market conditions.
Tesco Bank Retail Bonds will be issued as part of Tesco Bank's strategy to diversify its funding base ahead of plans to increase the range of services and products offered to customers which, subject to regulatory approval, will eventually include mortgages.
Benny Higgins, Chief Executive of Tesco Bank, commented: "We are delighted by the excellent response by investors to what will be the second issue of Tesco Bank Retail Bonds. Although we are principally funded by retail deposits, the success of our second Retail Bond, which once again exceeded our target, shows the keen interest of a broad customer base in both Tesco Bank and in the range of savings and investments that we offer."
Over the eight-year term, the Retail Bonds will pay interest twice a year at a 1% annual gross rate of interest adjusted to take account of changes in the RPI. On maturity, the amount due will be the full value of the bonds plus any overall increase in the RPI. If the RPI has fallen during the term, Tesco Bank has committed to repay the bonds at no less than their full face value.
The Tesco Bank RPI-linked Retail Bond is not covered by the Financial Services Compensation Scheme (FSCS). In the unlikely event that Tesco Bank goes out of business or becomes insolvent, the FSCS will not pay compensation to an investor in the Tesco Bank RPI-linked Retail Bonds and customers may lose some or all of their investment.
The Tesco Bank RPI-linked Retail Bond can be bought and sold before maturity on the open market through the London Stock Exchange's Order Book for Retail Bonds.