chocolate bond issue

'Candy maker issues chocolate bonds'

Last Updated: Tuesday, May 25, 2010 | 2:15 PM ET
"U.K. confectioner to sell 5 million pounds worth of sweet-paying securities.
British confectioner Hotel Chocolat hopes to raise the equivalent of $7.3 million by
issuing bonds in which the payments are made not in money but in chocolate.
British chocolatier Hotel Chocolat plans to fund expansion with chocolate bonds.
The U.K. chocolatier is taking advantage of low interest rates to fund its expansion
plans. Under the scheme, 100,000 of its Tasting Club members — who already pay
for home deliveries — will be offered the opportunity to put up between 2,000 and
4,000 British pounds ($3,000 and $6,000 Cdn) for a three-year "chocolate bond."
The less expensive bond earns the buyer a delivery of 18 pounds ($27 Cdn) worth
of chocolate every two months, the equivalent of a 6.72 per cent yield. A larger
investment earns 7.29 per cent, because the same shipment will come monthly.
"We have ambitious plans for the future, and when it came to considering the
funding of these plans, we decided to think somewhat differently," Hotel Chocolat
CEO Angus Thirlwell told Reuters. "Rather than borrow in the traditional way and
pay interest to a big bank, we would much prefer to provide a return to our customers
— in chocolate — through a chocolate bond."
Funds will be used to pay for factory expansion and new retail locations, the company
said Tuesday. The offer will be sent to club members some time this week."
Read more: http://www.cbc.ca/money/story/2010/05/25/chocolate-bonds.html#ixzz0p2YjXGFF

 

1) Instead of blowing up in your face, they will melt in your hands.
2) If this company is publicly-held, you would want to short-sell it. :eek:

 

Can't be any weirder then the Bowie Bonds.

 

Unfortunately, the company is privately held.

If you think about it, chocolate bonds is a smart idea. Not only the company gets a loan (from bondholders) at a good rate but they pay out the loan with their own produce including retail mark-up. A bond issuer can't go wrong with that.

 

Interesting.

From wiki:

Bowie Bonds are asset-backed securities of current and future revenues of 25 albums (287 songs) that David Bowie recorded before 1990.

Issued in 1997, the bonds were bought for US$55 million by the Prudential Insurance Company. They paid an interest rate of 7.9%. Collateral was royalties from the 25 albums.[1] The average life of the bonds was ten years.[2]

By forfeiting[citation needed] ten years worth of royalties, Bowie was able to receive US$55 million up front. Part of the money was used to buy out some rights to Bowie's songs owned by a former manager. Bowie was able to issue the bonds because, unlike many artists, he had kept control of his copyrights and master recordings.[2]

The Bowie Bond issuance was perhaps the first instance of intellectual property rights securitization. The securitization of the collections of other artists, such as James Brown, Ashford & Simpson and the Isley Brothers, later followed. These Bonds are named Pullman Bonds after David Pullman, the banker who pushed the original Bowie deal.

In March 2004, Moody's Investors Service lowered the bonds from an A3 rating (the seventh highest rating) to Baa3, one notch above junk status. This downgrade was prompted by lower-than-expected revenue "due to weakness in sales for recorded music." A downgrade to an unnamed company that guarantees the issue was also cited as a reason for the downgrade.

The success of Apple's iTunes and other legal online music retailers has led to a renewed interest in Bowie and Pullman Bonds.[3]

 

....maybe even more so if the price of cocoa drops.