This Escher Marwick review will give an overview of what the firm does as well as give an update about certain bonds it has issued.
UK-based Escher Marwick PLC is a publicly traded financing company that backs the real estate and renewable energy sectors.
Founded on April 8, 2016, Escher Marwick issues bonds. The net revenues of the bonds were earmarked for the funding of loan advances or acquisition of asset-backed assets that fit certain requirements.
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Considering that they have a guaranteed income and a smaller chance of capital loss than stocks, bonds are thought to be comparatively safer investments.
However, do note that this Escher Marwick review will shed light on the problems with the non-payment of interest on specific bonds.
Amid the default, it makes sense to now look at your entire portfolio as you might have more hidden risk.
Escher Marwick Review: Bond Investments
5% Fixed Rate Secured Notes Due 2023
Escher Marwick issued secured notes worth up to 10 million British pounds that bear a fixed interest of 5%. The Series 2018-F1 notes were due on July 9, 2023. The notes were part of the firm’s Secured Medium Term Note Program worth 1 billion pounds.
The purpose of these notes was to finance a loan that was given to Apex Aero Limited. Nonetheless, the borrower encountered challenges when it came to paying back the principal amounts stipulated in the agreement for the loan.
As a result, on July 5, 2023, the borrower sent a letter to Escher Marwick asking for a time limit within which to look into refinancing the loan agreement or suggesting other restructuring options. In response to this request, Escher Marwick signed a standstill agreement that was in force for 90 days, beginning on July 13, 2023.
The news that the Borrower had engaged administrators on September 12, 2023 reached both Escher Marwick and the trustee two days later. Such action consequently canceled the agreements that had paused any action on the loan between Escher Marwick and the trustee and the borrower. So now, the trustee can take legal action against Escher Marwick.
A notice of enforcement from the trustee was also received by Escher Marwick on September 19, declaring all Series 2018-F1 Notes immediately due and payable, plus any interest that has accrued. Escher Marwick was also told to cancel any legal authorizations they had given for the loan agreements.
To determine the appropriate course of action for the noteholders, the trustee is consulting with the joint administrators.
8.5% Fixed Rate Secured Notes Due 2021
Escher Marwick also sold up to 50 million pounds worth of collateral-backed notes, with a fixed interest of 8.5%. The notes matured in 2021.
According to the terms of the facility agreement, the Issuer gave Just Cash Flow plc two lending facilities on January 27, 2017, both in British pounds.
But JCF doesn’t have the staff or resources to handle loan servicing well because it’s under administration. Due to this circumstance, the security linked with the loans as well as the borrowers have deteriorated, which has led to a decline in the noteholders’ value.
Escher Marwick Updates
In an annual report and consolidated financial statements for the year ended April 30, 2023, Escher Marwick said it had four series notes in issue.
The company did not receive any proceed from the notes for the year compared to the 110,000 pounds it logged in 2022.
An aggregate six series notes matured but the holders remained unpaid in 2023.
However, the report said Escher Marwick remains as a going concern for at least a year from the announcement date.
Pros and cons of bonds investment
As part of this Escher Marwick review, let’s also look into the general positives and negatives of investing in bonds.
Benefits of bonds for investors
- Bonds offer a stable source of income.
- Bonds act as a sort of diversification.
- Traders can profit from price swings in the secondary bond market, especially with corporate bonds, which provide liquidity.
- There are various bonds, each meeting a different set of investment preferences with different maturities and coupon structures.
- Investing in bonds might be a more stable option for individuals who want to reduce their exposure to stock market changes because they generally show less volatility than stocks.
Risks of bonds
- The issuer or borrower may default in payments.
- Interest rate risk arises from bonds’ susceptibility to changes in interest rates, which can affect bond yields and prices.
- Bonds provide stability, but over time they typically provide smaller returns than equities, which limits investors’ potential gains.
- Bond interest is taxable at the federal level, which affects overall returns and makes investors pay close attention to the tax consequences.
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