Another high-profile ‘mini-bond’ business has collapsed into administration, with an estimated £45m of investors’ money at risk.
Restructuring specialists Duff & Phelps said on Thursday it had been appointed as administrator to Blackmore Bond.
Manchester-based property development company Blackmore raised around £45m ($55m) selling ‘mini-bonds’ to the general public in 2016 and 2017. Investors were asked to put in a minimum of £5,000 per person and were promised a return as high as 9.9% on some bonds.
However, Blackmore had not paid any monthly interest since October 2019. Blackmore’s management blamed the slow property market and repeatedly reassured investors payments would be forthcoming. Bondholders recently lost patience and went to the courts to request the company be dissolved.
“There has been concern regarding the company’s affairs for several months so it will be a relief for bondholders that independent professionals have now been appointed to the company,” Duff & Phelp’s Geoff Bouchier, the joint administrator of Blackmore, said in a statement sent to media.
“We are immediately undertaking a review of the properties and will immediately commence an investigation into the Company financial position.”
Blackmore is the latest high-profile ‘mini-bond’ company to collapse in the UK. ‘Mini-bonds’ are high-risk, high-interest investment products sold to ordinary savers by companies looking to raise cash. The sector is unregulated and has been plagued by miss-selling. The UK’s financial watchdog last year banned all online adverts for ‘mini-bonds’ and warned consumers they were at risk of being scammed.
UK savers lost an estimated £1bn last year investing in ‘mini-bonds’ that went bust. The highest-profile failure was London Capital and Finance (LCF), which raised £237m selling ‘mini-bonds’ to more than 11,000 small-time investors before going under. The Serious Fraud Office is investigating this case.
Blackmore and LCF both used the same marketing firm to raise cash. The UK’s financial watchdog stepped in to stop Blackmore raising new funds through mini-bond financing in the middle of last year, according to The Times, raising fears about its financial viability.
How To Negotiate A Pay Rise