Westway Holdings offers unregulated fixed-interest bonds paying 7.5%pa over a five year term.
Curiously, the return is 7.5%pa if interest is paid out to the investor annually, but only 7.34%pa if interest is rolled up and paid out at the end of the five years. The roll-up version is described as a “5 Year deferred income plan” and pays out 37.5% (7.5 x 5) plus a 5% bonus, for a total of 42.5%. A 42.5% return after five years is equivalent to 7.34% per annum compounded. This means that investors receive a lower return if they roll up interest, despite the use of the word “bonus”.
The statement in Westway’s brochure that their bonds pay “up to 8.5% annual return” is inaccurate. A bond which pays 42.5% at the end of five years does not pay a 8.5% annual return, the annual return is 7.34%. The use of compound annual return rather than simple interest is near-universal in the finance industry.
Open to new investment.
Who are Westway Holdings?
Westway Holdings was incorporated on 3 September 2015.
Westway’s Holdings’ “About Us” page contains full details of the directors, who are Antony Marks (Director & CFO) and Richard Birch (Director of Operations).
Despite Marks being described as “CFO” (in a traditional corporate hierarchy, this means Chief Financial Officer, the second highest post next to the Chief Executive Officer), Companies House shows that he owns 80% of Westway Holdings and this, combined with his director bio being listed first, suggests that he is the head of Westway Holdings.
How secure is the investment?
These investments are unregulated corporate loans and if Westway Holdings defaults you risk losing 100% of your money.
Westway states that investors’ money is invested in Supported Housing for tenants such as people with disabilities, ex-offenders and substance abusers. Its income comes from the Government but investors should not confuse this with their investment being backed by the government. If the rent paid by the Government / other tenants is insufficient to pay investors a 7.5% return, investors may lose their money.
Westway makes clear on its website and brochure that the investment is not covered by the Financial Services Compensation Scheme.
Bonds are secured against the assets of the company, with an independent trustee (More Group UK) appointed to monitor asset values to ensure that Westway’s debt does not exceed 90% of the value of their assets, and take control of the assets in the event that Westway defaults.
Before placing any reliance on the security backing the bond, investors need to assure themselves that in the event that Westway defaulted, the Security Trustee would be able to sell the assets for enough money to compensate investors. While the assets are revalued bi-annually by independent valuers, investors need to bear in mind that Westway’s assets (Supported Housing properties) are designed to be occupied by vulnerable tenants and cannot be sold as easily as a property occupied by private tenants who can simply be given notice. The market for such properties is likely to be restricted.
Should I invest with Westway?
As with any unregulated corporate bond, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.
This particular bond is described as asset-backed. Before putting any reliance on the security backing the bond, investors should undertake professional due diligence to ensure that a) the security exists b) in the event of default, the security could be easily sold and would raise enough money to cover all investors’ money c) the charge over the security has been properly and legally recorded.
Before investing investors should ask themselves:
- How would I feel if the investment defaulted and I lost 100% of my money?
- Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
- Have I conducted due diligence to ensure the asset-backed security can be relied on?
If you are looking for “security”, you should not invest in unregulated products with a risk of 100% capital loss.