Mini bond mania: 8 companies that turned their customers into investors

Chilango has just issued a 'Burrito Bond', following in the grand tradition of getting customers to invest in return for chocolate, fine wine and tennis tickets.

by Rachel Savage
Last Updated: 27 Apr 2015

Mexican restaurant chain Chilango is going down the crowdfunding route – but with a jalapeño-spiked twist. The seven-year old company is issuing a ‘burrito bond’, but instead of doing all the legalese and legwork themselves, which could’ve cost as much as £100,000, they’ve launched it on equity crowdfunding platform Crowdcube.

Chilango, which has seven restaurants across London, is hoping to raise £1m in the next 60 days and has so far attracted £144,500 from 33 investors. The four-year bond offers 8% annual interest and two free burrito vouchers, while those who put in more than £10,000 get free food and drink at Chilango for its duration (MT can already feel those burrito food babies…).

So-called mini bonds can’t be traded on secondary markets like normal retail or corporate bonds and are far less regulated. That also means if a company goes bust you may not get your money back, as there’s no protection from the government for bonds (although you may also get food, wine or razors in return for taking on the risk).

That hasn’t stopped many businesses from sticking two fingers up at the reluctant-to-lend banks and going straight to their customers for funding, who are attracted to the alternative bonds by the pitifully low interest rates offered on pretty much everything else. Indeed, the value of mini bonds could rise to £8bn by 2017, up from £90m in 2012, according to Capita Registrars.

However, the trend isn’t just post-financial crisis: Wimbledon was doing in the 1920s.

1. John Lewis

Investment: £1,000 - £10,000 over five years
Coupon: 4.5% cash & 2% John Lewis/Waitrose vouchers
Amount raised: £50m, April 2011
MT says: I feel so invested in my new cashmere rug.

2. Hotel Chocolat

Investment: £2,000 or £4,000 for the initial three-year term term (93% rolled their investment over)
Coupon: Six or 13 £18.95 boxes of chocolates per year (equivalent to 6.72% or 7.29% interest)
Amount raised: £4.2m, July 2010. Hotel Chocolat is now hoping to raise £10m more with its Chocolate Bonds No. 2 (slightly different terms to No. 1).
MT says: Not only is chocolate better than sex, it seems it's better than money, too.

3. Naked Wines

Investment: £500 - £10,000 for three years,
Coupon: 7% cash or 10% wine credits, 10% premium if the original investment is spent on wine when it matures
Amount raised: £5m, September 2013
MT says: Where can we invest in a brie bond?

4. King of Shaves

Investment: £1,000 over three years
Coupon: 6% cash plus £30-£60 worth of shaving products
Amount raised: £627,000, June 2009
MT says: Smooth…

5. The Jockey Club

Investment: £2,000 - £100,000 (average £12,000) over five years
Coupon: 4.75% cash and 3% in ‘Rewards4Racing’ points, which can be spent on tickets, wining and dining at the group’s 15 racecourses
Amount raised: £24.7m, May 2013
MT says: Fancy a flutter?

6. Ecotricity

Investment: Eco Bond 1: £500 - £416,500 (average of £5,590) over four years; Eco Bond 2: £500 - £250,000 (average of £4,750) over four years
Coupon: Eco Bond 1: 7% or 7.5% for customers; Eco Bond 2: 6% or 6.5% for customers
Amount raised: £10m in December 2010, £10m in December 2011
MT says: Get paid and save the planet.

7. Mr & Mrs Smith

Investment: Minimum of £1,000, or multiples of £1,000 with no upper limit (average £5,000), for four years
Coupon: 7.5% or 9.5% if spent booking stays at Mr & Mrs Smith's boutique hotels
Amount raised: Just under £2m, May 2012
MT says: We will if you will, darling.

8. Wimbledon (All England Lawn Tennis Club)

Investment: £50,000 for 2016-2020 Centre Court ‘debentures’, £13,700 for 2012-2016 No.1 Court ‘debentures’. They’re not quite the same as a mini bond though – they can be traded on a private after-market and a £27,750 2011-2015 Centre Court debenture sold in March for a whopping £90,000.
Coupon: One ticket to matches on each day of the tournament, the only freely-tradable ones around. With seats at last year’s final changing hands for more than £70,000, investors could net a smashing return.
Amount raised: £125m before tax (2016-20 Centre Court debenture)
Interestingly enough: The original debenture was issued in 1920 to fund building the current site. It had a rather lengthy 25-year maturity and had the option of a 7.5% cash coupon instead of free seats.
MT says: Anyone for a game of tennis?

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