Severn Trent launches new bond for private investors

Tap The mount of money Severn Trent raises will depend on interest from the public

The water company Severn Trent is raising money by offering an inflation-linked corporate bond to the public, rather than to professional investors.

The bond, a glorified IOU, will last for 10 years after which investors will get their money back, plus any rise in the retail prices index (RPI).

It will also pay investors interest of 1.3% each year, a return which will change in line with movements in RPI.

Investment bonds were launched in 2011 by Tesco, John Lewis and National Grid.

The initial minimum value of the bonds that can be bought from Severn Trent is £2,000.

Mike McKeon, chief financial officer at Severn Trent, said: "We are pleased to be the first water company to issue a retail bond.

"This retail bond issue diversifies our funding sources while also seeking to meet demand from retail investors for inflation linked products."

The bonds will be offered for sale until 4 July, and will then start trading on the London stock exchange on 11 July.

Their market value will therefore fluctuate and may fall, before they mature and are eventually repaid plus interest.

Investors are not covered by the Financial Services Compensation Scheme.

"In the event that Severn Trent defaults or becomes insolvent, investors may lose some or all of their investment," the company warned in a statement..

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Features

  • The Duchess and Duke of Cambridge and Prince GeorgeGorgeous George

    Baby steals show as tour reveals rise in support for monarchy


  • Houses of ParliamentBig impact?

    How a Scottish Yes vote would change the UK Parliament


  • Kim Jong-un visits a children's campThe Notepad Men

    Who are the people who take down Kim Jong-un's every word?


  • Donald Tusk7 days quiz

    What made Poland's prime minister become an internet hit?


  • Beebcoins logoMaking money

    How easy is to coin your own virtual currency?


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.