Should you buy Harlequins rugby club mini-bonds?
Twickenham rugby club Harlequins is to become the latest sports club to tap its supporters for cash when it issues a 5.5% mini-bond. But is it worth buying in?
Harlequins, the Twickenham-based rugby club that celebrates its 150th anniversary this year, has become the latest sports club to tap its supporters for cash.
The club has announced the issue of a five-year "mini-bond" yielding a gross rate of 5.5%, which, according to CEO David Ellis, offers supporters "the opportunity to be part of the next chapter of Harlequins' story". Interest will be payable six-monthly in arrears.
Quins join their rivals Wasps, who last year offered a retail bond of 6.5%, which "met its £35m fundraising targets within days", according to This Is Money. Harlequins hopes to raise £7.5m, but could issue up to £15m worth of bonds if the demand is there.
You'll need at least £2,000 to buy in to the offer, thereafter you can buy in multiples of £1,000. For that, you get the honour of membership to the "Quarters Club", which will give you a few questionable perks, such as the "opportunity to purchase the chance to join the team for elements of their pre-season tours".
There are a few fairly substantial drawbacks, however. The headline 5.5% rate is subject to 20% withholding tax. As it is a mini-bond, there is no secondary market, so it is a very illiquid investment you commit to holding for five years, after which you may give six months' notice to redeem the bonds.
It's a risky investment, too. The bond is unsecured, so you will have no comeback should the club go bust nor will you be protected by the Financial Services Compensation Scheme. And you should probably be aware that, while turnover at the club rose by 14% in the last year, it is currently trading at a loss.
Season-ticket holders and club members get first dibs until 3 May. After that, the offering will be opento everyone else.You can apply for the bonds at www.harlequinsbond.com until 1pm on 16 May.