The guarantee

Around 80 per cent of the money invested in the East London Bond has been lent to Places for People Homes (PfPH). The repayment of the loan will provide Citylife with the funds to repay Bondholders.

PfPH has a credit rating of Aa3 from Moody’s Investors Service (click here for more details), but some investors may wish to have additional protection against the risk of PfPH defaulting on its obligations under the loan. Therefore, Citylife will be offering two types of Bonds: Series I Bonds and Series II Bonds.

Series I Bonds

The proportion of the loan to Places for People Homes which backs the Series I Bonds will be supported by a guarantee from either or both Barclays Bank PLC and The Co-operative Bank PLC. In the event that Places for People Homes does not repay some or all of the loan when due, then the guarantors will between them make up the shortfall so that Citylife receives back the full value of the Series I Bonds and can repay Series I bondholders.

Moody’s Investors Service has given Barclays Bank PLC a credit rating of Aa3 and The Co-operative Bank PLC a credit rating of A2.

The guarantors will charge 3.75 per cent of the total amount of the Series I Bonds over the period of the loan as a guarantee fee. This charge will be deducted from the grant that the Bromley by Bow Centre and Community Links will receive. However, investors in Series I Bonds can offset this cost if they wish by making an additional donation at the point of application.

Series II Bonds

Unlike the Series I Bonds, the investors in Series II Bonds are solely reliant on Places for People Homes repaying the loan in order to be repaid in full when the bonds are due. However, this means that no guarantee fee is deducted from the proceeds of the Series II Bonds which go to the charities.

For more about why Citylife believes the risks of investment in the East London Bond to be very low, see the risks.