Fixed-interest secured bond - effective rate of 8.5% p.a.
What springs to mind if you have a quick glance at the picture below? Perhaps a contemporary – if out of season – Christmas light installation or maybe the set of a science fiction movie. Few people would guess this bright pink hangar is a gigantic greenhouse in Suffolk – the size of 12 international football pitches. It is used to grow tomatoes hydroponically (i.e. without soil) all year round.
The first crop was planted just before Christmas and should be harvested this month. It’s a fast turnaround: in the greenhouse tomato plants can grow at 35cm per week until they reach up to 15 metres in height. That's roughly the height of a five-storey building. Within 12 months, around 150 million tomatoes should be produced and packed ready to land on our dinner tables.
Sterling Suffolk Ltd, the company behind this project, has a rolling contract with one of the leading distributors of fresh produce to various supermarkets.
LED grow lights give off much less heat than SON-T lamps and are up to 40% more energy efficient
Why could tomatoes matter to investors?
The greenhouse – and the whole operation, a £15 million project – is being largely funded by private investors, through a combination of equity and debt.
The equity element was funded via the Sterling Suffolk EIS, which is fully subscribed and now closed. It is still possible to invest in the debt part through the Sterling Suffolk S1 bond, which aims to raise £8.2 million to lend to Sterling Suffolk.
The bond is managed by Amberside ALP, whose team has invested in – or advised on – infrastructure projects worth around £5.5 billion.
An attractive rate of interest
The bond aims to pay an effective fixed-rate of 8.5% a year.
It is a fixed-term bond. Capital and rolled up interest should be paid at the end of the bond period, planned for 31 January 2022. Interest of 8.5% p.a. should accrue and compound.
The table below shows how this might work in practice, based on different investment amounts.
Please note, this is an investment, so capital is at risk. It's only for experienced investors and you should not invest money you cannot afford to lose. Interest and capital repayment are not guaranteed.
This bond is not covered by the Financial Services Compensation Scheme for deposits. It is not readily realisable.
Sterling Suffolk S1 Bond rates and interest - for illustration only
|Effective annual interest rate (not guaranteed)||8.5%||8.5%||8.5%||8.5%|
|Gross interest rolled up p.a.||£850||£2,125||£4,250||£8,500|
|Total capital gross interest earned over the term (Feb 2019 – Jan 2022)||£12,686||£31,716||£63,432||£126,864|
What protection do bondholders have?
The bond is asset backed. S1 bondholders will effectively have a first charge over all Sterling Suffolk’s assets. The potential for generating relatively predictable cash flow over a protracted period should provide additional comfort. However, please note S1 bondholders will only be lending to one firm, Sterling Suffolk Ltd. There will be no diversification, which adds to the risk, although the interest rate reflects this.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
Bonds such as this one are not readily realisable. They tend to be illiquid and hard to sell and value. This should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.As with all bonds of this type they are not covered by the Financial Services Compensation Scheme for deposits, although money held pre-investment in the ISA account should be covered.
The S1 bond is technically transferable, however there is no secondary market, so investors should assume it will need to be held for the full term.
Interest is rolled up and not paid out until redemption. So, if you invest in the Bond on November you will wait 39 months until Jan 2022 before you get anything back.
This is a single company bond offer with no diversification. It involves lending to one company only. Should that company not perform as planned repayment to the bondholders may be impacted.
What to consider next
Please visit the offer page using the link below to download the provider documents and read more (including risks and charges).
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
Read more and download offer documents
Read more about this offer, including the risks and download all the offer documents.Offer page