Zenith Energy bond review – that will be the topic of this brief review.
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Where do most clients invest in this option through?
Most clients buy through Custodian Life, The Investment Platform (TIPS) and Moventum/Capital Platforms, to name just a few.
Many investors are within the expat community, in numerous countries around the world.
What are the essential elements of this investment?
Zenith energy is in the business of international energy production. They are listed on the London Stock Exchange and the Euronext/Oslo Stock Exchange (ZENA).
They have been growing recently, including an acquisition made in 2021.
They are now using the financing from the bonds for further growth. The bond terms are 10.5% per annum on the British Pound, 10.125% in Euros and 10.375% in USD, paid semi-annually.
The bond is due for maturity in 2026.
What are the positives associated with this option?
The main positives are:
- This investment can give you a better return than a bank account, and government and some corporate bonds
- There has been a good track record in terms of paying out clients
- They aren’t reliant on high oil prices to make a profit. Even if the price of oil falls to $20, they can still retain profitability, as there are many ways to profit from the production of oil & gas.
- They have a B-rated status from two credit rating agencies.
What are the negatives?
The primary negatives are:
- This investment isn’t liquid, so you can’t sell out in the middle if you have an emergency.
- This investment has enhanced risk compared to some government bonds, but you are compensated with the extra return.
- This is an unsecured bond, meaning the company isn’t required to fulfil the bond promise in full.
- For some, but not all, investors, there is a moral component associated with investing. Increasingly, many investors don’t want to put money towards oil & gas exploration. This isn’t a problem with the Zenith business model. It is also unlikely to affect the business profitability in the next five or ten years. However, if the moves towards “net zero” from governments continue to become more aggressive, it will be interesting to see how profitable oil & gas exploration is in the 2030s and beyond.
This can be a good investment if it aligns with your risk appetite and is kept within a reasonable percentage of your total investment pot.
For some investors then, this is a recommended investment. For others, for example, those who need liquidity and potential quick access to money, better alternatives exist.
It is also important that you are represented by an advisor who understands your personal circumstances, so this investment is aligned with that.
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