Despair for investors in £50m ‘Bollywood bond’
DIY investors have been left waiting for thousands of pounds in late payments from a £50m retail bond still available for sale at Hargreaves Lansdown.
Savers were lured by the promise of 6.5pc annual interest and a guarantee that they would get all of their money back this year when Eros Media World, a Bollywood production company, issued a £50m retail bond on the London Stock Exchange nine years ago.
Adem Demir, who spoke under a pseudonym, invested thousands of pounds from his pension into the Eros bond. “Eros is a very prominent film producer in India and is a well- established business. I know retail bonds are risky, but this is such a well-known company I had no reason not to trust them,” he said.
But Mr Demir has been left thousands of pounds out of pocket, after the company failed to deliver a payment due in October. He should have received an interest payment of 8.5pc, after a restructuring triggered an increase in the bond rate in 2021. A higher yield typically suggests a higher risk of default.
Eros blamed the delay on “administrative issues” following an internal demerger. It promised in November that it would solve the issue as soon as possible – but months later, bondholders waiting for their money have been met with silence from the company.
“I would never have bought it if I hadn’t seen it on Hargreaves Lansdown,” Mr Demir added. “It is worrying that it is still listed there. I am concerned that unsavvy investors will see its high yield and just buy it without considering the increasingly high risk of default.” The bond was also still available to trade via rival broker Interactive Investor.
Retail bonds, unlike deposits with banks, are not covered by the Financial Services Compensation Scheme. This means that if the issuer goes bust, bondholders are likely to lose their money.
Unlike “mini-bonds”, retail bonds can be traded on the exchange. The Eros bond is now trading at around £9, down from its £100 listing.
The Financial Conduct Authority declined to comment, but it is understood that the City watchdog is aware of the issue.
Eros Media did not respond to a request for comment. Hargreaves Lansdown declined to comment.
A spokesman for Interactive Investor said the bond was deemed a “complex product” so investors were asked to complete a test to confirm their suitability before trading.
The platform said that while failure to pay interest or dividend does not lead to a block of trading, it did contact the company but received no further information.