5.75% fixed income for 7 years, what are the risks?

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Apha Plus Holdings own a bunch of private schools and they recently launched a 7 year bond with a fixed coupon of 5.75% (paid twice a year). The company is chaired by Sir John Ritblat (British Land) and is owned by a private equity property firm.

The premise of the business is simple: provide excellence in education.

Although the company is not listed, the bond is secured by their property portfolio. I think I’m safe in saying the business is recession proof; it’s simply unlikely that the wealthy are suddenly going to turn their back on private education. Alpha Plus could have a black swan event but then again so could Tesco!

There is a very real risk that the property portfolio could fall in value but even here I can’t see much of a problem. They have pledged 6 schools and 1 nursery and have to maintain coverage of 1.5 times the bond. In short: if the properties pledged fall in value they will have to pledge more properties. As there are more properties in the portfolio so that’s not going to be a problem.

I am struggling to see the downside and have bought some to tuck away for the next 7 years.

Susan Marmor has been trading her ISA and SIPP full time for 7 years. She has made money every year, including 2008. She believes that making money is about picking the right shares at the right time and using sound money management techniques to manage risk.

For her trading she uses a combination of sound fundamental data and technical analysis (which involves using price charts and some of the fancy bits and pieces that go with them). She runs the occasional seminar to show people what she does and how she does it.

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