King of Shaves offers 6% corporate bond
Philip Scott, This is Money
23 June 2009
Will King, founder and CEO of The King of Shaves Company, is offering savers the opportunity to help join in the firm’s growth with the issuance of ’shaving bonds’ - yielding ‘12 times the present bank rate’.
King is issuing 5,000 bonds, in a bid to drum up a war chest of £5m to fund the firm’s growth interests.
The bond aims to pay investors interest of 6% each year over three years - a potentially tempting offer for income-starved savers, given that rates are at historic lows.
The bonds are non-transferable and non-convertible and have been approved by City watchdog, the Financial Services Authority.
Investors can apply for up to £5,000 worth of Shaving Bonds in multiples of £1,000 and those who sign up will be kept in freebies for the duration of the bond, including a limited edition mirror finish Shaving Bond certificate, as well as exclusive, King of Shaves products.
King describes his venture as re-introducing ‘enthusiast bond schemes‘, first made popular in post-war Britain, as an alternative to raising funds from banks, venture capitalists or private equity firms.
Proceeds of the Shaving Bond will be used to take on the might of Proctor & Gamble, the parent firm of Gillette Fusion and Energiser, the firm behind Wilkinson Sword.
The 43-year old entrepreneur, King, says: ‘The funds will help the company to compete with the faceless duopoly of Gillette and Wilkinson who use their vast, multi-million pound marketing spends to promote exorbitantly-priced razor handles and cartridges which cost pennies to make but are sold at a mark-up of more than 4,750%.’
The global razor industry is worth more than $10bn and £300m a year in the UK alone. The group, which was established as Knowledge & Merchandising Inc. Ltd in 1993, last year launched the very first UK designed, engineered and manufactured razor in more than a century.
King of Shaves toiletries are sold in the likes of Boots, Sainsbury’s, Superdrug, Tesco and Waitrose. King’s aim is for King of Shaves to be worth £1bn – compared to its competitor Gillette which is worth circa £57bn. King says that sales this year will have doubled and that there has been repeated interest from the private equity sector. As such, ‘as long as beards don’t stop growing overnight,’ he is confident he can honour the bond obligations over the three years.
The primary risk with any bond investment is that the firm issuing the bond could go bust and with it investor cash. If the firm did go to the wall, ’shaving bond’ holders would have to fall in line with other creditors.
Commenting on the shaving bond, Ben Yearsley of Hargreaves Lansdown, an independent financial adviser, urges caution on offers like this. ‘This is an investment and not a savings vehicle.’~~~