DIY investors have been left waiting thousands of pounds in late payments on a £50m retail bond that is still available for sale at Hargreaves Lansdown.
Savers were lured by the promise of 6.5% annual interest and the guarantee that they would get all 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, speaking under a pseudonym, invested thousands of pounds of his pension in the Eros bond. “Eros is a very prominent film producer in India and it is a well established business. I know retail bonds are risky, but this is such a well-known company that I had no reason not to trust them,” he said.
But Demir has been left with thousands of pounds in his pocket, after the company missed a payment due in October. He should have received an 8.5 percent interest payment after a restructuring caused the bond rate to rise in 2021. A higher yield generally suggests greater default risk.
Eros blamed the delay on “administrative issues” following an internal split. He promised in November that he would resolve the issue as soon as possible, but months later, bondholders hoping for money from him were met with company silence.
“I never would have bought it if I hadn’t seen it at Hargreaves Lansdown,” added Demir. “It is concerning that he is still listed there. I worry that inexperienced investors will see its high yield and just buy it without considering the increasing risk of default.” The bond was also available for trading through rival broker Interactive Investor.
Retail bonuses, unlike bank deposits, are not covered by the Financial Services Compensation Plan. This means that if the issuer goes bankrupt, bondholders are likely to lose their money.
Unlike “minibonds”, 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 the City’s watchdog is understood to be aware of the issue.
Eros Media did not respond to a request for comment. Hargreaves Lansdown declined to comment.
An Interactive Investor spokesperson said the bond was deemed a “complex product” and investors were therefore asked to complete a test to confirm its suitability before trading.
The platform said that while failure to pay interest or dividends does not lead to a trading block, it has contacted the company but received no further information.