Mexican food chain launches bond paying 8%
The four-year ‘Burrito Bond 2’ pays an interest rate of 8% and the minimum investment is £500.
This is the second mini-bond the company has issued.
In 2014, the first Burrito Bond raised more than £2m and attracted more than 700 investors.
Chilango was founded in 2007 by two former Skype executives, Eric Partaker and Dan Houghton. It has 11 restaurants in London and Manchester, with more than 25,000 customers a week.
The chain plans to open a new site in Birmingham in the next few months.
What are mini-bonds?
While mini-bonds tend to offer attractive interest rates, they are high risk propositions.
They are unsecured and non-transferable so cannot be traded on a secondary market, meaning you are locked in until the maturation point, which in this case is four years.
They are not subject to the same rigorous regulation as other bond products and are not covered by the Financial Services Compensation Scheme (FSCS), so if the issuer goes bust you could lose all your money.
The Burrito Bond 2 also comes with the added risk of investing in the restaurant sector.
Adrian Lowcock, head of personal investing at broker Willis Owen, said: “Restaurants can be profitable in the short and medium term but it’s a very competitive space and even well-established or well-known brands don’t necessarily survive when there’s a change in consumer taste.”
Burrito Bond 2
According to Chilango, sales have nearly doubled since the first bond and are on track to hit £11m this current fiscal year.
Partaker said: “We launched our first bond four years ago and we’ve never missed a beat, with a perfect payment history. Burrito Bond 2 enables us to raise further growth capital and continue our march ahead.”
In addition to the 8% interest rate per annum, holders of the Burrito Bond 2 get extra perks in the form of free burritos. For example, if you invest £1,500 you’ll get five meals free.
The bond is available until 2 December 2018 and interest is paid twice a year.