I know all about the current bond, I have almost £70k invested in it. But if you have to buy in at 70% on a re-issued bond, you are right there is a potential 30% upside. But no one is going to invest at 6.5%, when the current bond is trading at about 70%!
The point is that the market is judging it as only being worth 70%! So a new bond would have to offer a coupon rate of 9.3% to maintain the status quo, so probably 9.5% to 10% as a sweetener! That is unsustainable, because Wasps would have to pay so much more interest, and they are losing money annually on the current situation.
Blimey.. I feel that I've wandered into the Financial Times website... if you're new to rugby.. then why did you invest?
I actually invested just over £67k, but will get back over £77k (and because capital gains are tax free on individual corporate bonds it is equivalent to a gross £12.5k / 18.7% gain)
if they mange to refinance. I'm invested in a lot of things, you don't necessarily need to know all the ins and outs of the day to day running of every 'industry' that you invest in, but to answer your question, I invested it from a financial perspective (not a sporting perspective), and this was my reasoning. I obviously was aware that there was a risk, that's why it was priced below £1 (when I invested). But because the bond is secured on the stadium I thought (and still do, but now to a lesser extent) that the risk was worth it for the high yield and tax free capital gain on the bond value.
But I must admit that I didn't expect such a poor start to the season, which I think if it leads to relegation will make any refinancing package much more difficult. I'm hoping that the defeat to London Irish is more a case that they are better than expected, rather than Wasps being much worse than expected.
I was also surprised that Wasps didn't make more of an effort to keep Coventry City playing at the Ricoh, that was a significant drop in income.
Also there was talk of no team being relegated this year, and an extra team being added to the premiership league, but that plan seems to have been rejected. Which is a shame because it would have meant no risk of relegation this season, less risk next season (with another team being a potential relegation candidate, and income from an extra two games.
So things haven't gone too well both on and off the field since I invested.
I think the refinance options are going to be:
1. Sale and leaseback of the Ricoh, they have previously stated that this is not an option, but they will not be able to avoid doing this if they do not find another option.
2. Sell the club (or part of it), by attracting another investor, maybe to Coventry City (but I can't see that going down well) or even floating it (Derek Richardson could hold a significant shareholding) and offering Wasp fans and other investors the chance to own part of the club.
3. Sell the non sport assets (eg the hotel/conference centre etc), but this would not raise enough on its own, so that would only be a partial solution in conjunction with something else happening.
4. Issue another corporate bond, but I do not think this would be possible, unless they improve their financial position by raising cash and income (maybe by getting Coventry City back and selling other assets as 3 above or selling part of the club as 2 above).
I can't think of any other way to refinance the bond, but maybe I am missing something, any ideas anyone?