This review of BodySmart Finance bonds will tackle the features and terms of the fixed rate bonds offered to investors, as well as give updates on recent developments about the program.
The funds obtained from the bond issuance were earmarked for strategically expanding the portfolio of BodySmart Investment Group (the borrower) through the acquisition, establishment, and management of cosmetic surgery centers, polyclinic practices, health clubs, wellness and spa businesses, as well as medical equipment distribution firms.
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Investing into high-risk options like this always carries big risks, and you could lose all your money. Caution and seeking professional help are advised.
Your investment portfolio is vulnerable to hidden risks such as bond issuer default on interest payments, which can impact your earnings, capital, credit exposure, liquidity, and the overall success of your investment.
To reduce your exposure to these risks, it is crucial to diversify your investments and perform comprehensive due diligence.
Bodysmart Finance Fixed Rate Bonds Terms and Features
BodySmart Finance Limited has issued bonds worth up to 15 million USD that bears a fixed yearly interest rate of 12%. Such interest is paid twice a year.
The bonds were issued on June 3, 2020 and are set to mature on the same date in 2025.
This offering is the first tranche of the company’s larger medium term note bond program worth 100 million USD.
This program is similar to an instrument that investors use to lend money to firms, such that they can obtain a smaller amount of money as needed rather than taking out a large loan all at once.
Investors can buy and sell these bonds on the open market in Frankfurt.
Investors can only trade BodySmart Finance bonds in increments of 125,000 units. That means bond sales and acquisitions must hit a minimum of 125,000 units. This requirement ensures that the bond market remains liquid and that operations are streamlined by standardizing trade sizes.
How are the BodySmart Finance bonds secured?
Pledges of shares from all issued share capital holders and bank account pledges from BodySmart’s portfolio companies support the Bond Program.
BodySmart Finance Bonds Redemption
BodySmart Finance has the ability to redeem or call the bond prior to its scheduled maturity date under certain predetermined conditions, as stated in the bond offering’s call option.
A reduction in interest rates or an improvement in the issuer’s financial status that allows them to refinance at a reduced expenditure can trigger this extraordinary option, which deviates from the typical repayment time frame.
What’s happening to the BodySmart Finance bonds?
BodySmart Finance told noteholders that BodySmart Investment Group LLC didn’t pay 278,200.15 USD in interest to the issuer by December 3, 2023, marking an event of default.
On March 8, 2024, BodySmart Finance again notified noteholders that BodySmart Investment has yet to deliver the interest payments due. In fact, BodySmart Investment has proposed to revise the bond deal terms in order to meet its financial obligations.
The bond’s coupon payments are scheduled to be postponed until its maturity date on June 3, 2025, when the principal and interest would be paid in full, according to the proposed revisions.
From December 4, 2023, until the maturity date, the coupon rate will be increased to 14% per annum with the addition of a 2% default interest.
Moreover, BodySmart Investment proposed halting and eventually dismantling the Medium Term Note bond scheme. The company believes it will be able to better manage its debt commitments and streamline its financial processes as a result of this decision.
During the remaining term of the bond, BodySmart Investment plans to fulfill its obligations to BodySmart Finance and noteholders as outlined in the proposed transactions agreements by concentrating on cash accumulation and expanding into India.
BodySmart Investment cited the notable period of interest rate hikes to hedge against inflation as one of the major reasons as to why investment interest on these bonds has waned. Since the difference in interest rates between the bonds being offered and those of less risky securities have tightened, investor appeal did too.
Currently, the bond offering was undersubscribed at 4.6 million USD within a three-year time frame.
This amendment proposal is still subject to approval.
If the proposal gets approved, BodySmart Investment will pay for all costs since there’s no money saved up. If it’s rejected or if security is enforced, the borrower won’t cover the expenses. This might cause delays in settlements and reduce the final payments for noteholders.
Final Thoughts
Potential investors looking for a greater yield than other investment options would have been interested in the 12% fixed rate return offered by BodySmart Finance bonds.
However, high-yield bonds like this are generally considered riskier than investment-grade bonds due to higher probability of default. The missed interest payments from December 2023 strongly reflected this.
With the BodySmart Finance bonds situation reaching this point, it is wise to seek the advice of a financial advisor to determine the next measures to take. Keep in mind that a company’s track record does not guarantee that it will maintain its current level of success going forward.
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