Last week I received an email from Mintos saying that IuteCredit, a loan originator on the platform, announced the issuance of a four year senior unsecured corporate bond (ISIN XS2033386603) worth EUR 40 million, with an annual interest rate of 13%.
So yes, this is not technically a Mintos bond…but who knows IuteCredit otherwise?
This is not the company first bond, I see that in the past they issued EUR and USD bonds but in amounts substantially lower, one and two million.
My thoughts in random order:
– I do not have Bloomberg in front of me (so nice to have Anywhere and then leave the token systematically at the office) to check how far in ratings you have to go today to get a 13% yield in EUR but I suspect something quite ‘toxic’, so this bond has a potential market
– for the evolution and acceptance of the industry, this is a step forward: institutional investors have formal mandates and a senior bond is one of the few ways they have to get exposure to this type of credit
– securities backed by credit card loans have a long history and in the US Lending Club and Prosper have issued bonds since years, so this is a novelty only in a limited way. It is the first time I hear something like this in Europe and in this size
– can it be a sign of a peak? yields are going down, previous bonds offered 14 and 15% returns and IC is using the proceeds to buyback Mintos loans with higher coupons. This means investors are accepting lower and lower returns, not a good sign but calling a top is almost impossible. There are EUR junk bonds with maturity less than two years that offer negative yields so…maybe that is a sign of fraughtness! (I can still remember when ING Direct was offering me 6% on a current account)
– it reminded me that no one is talking about duration risk anymore: ten years ago any fixed investment brought the caveat that rising interest rates will hurt returns…but now we live in a world where IR can go only in one direction, down
– it brings transparency and visibility, to the company issuing the bonds but also to the industry in general
Would I buy it? The minimum amount is EUR 1.000, not ideal from a risk diversification point of view for the size of my portfolio. It is like investing in IC loans with a buyback guarantee but with a worse cash flow profile, since the bond pays a semi annual coupon and capital at maturity. At the moment my Mintos return is 11.50%, so it would represent a pick up in yield.
What is your opinion? leave a comment!
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