Should you buy Harlequins rugby club mini-bonds?

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 open to everyone else. You can apply for the bonds at until 1pm on 16 May.