Two changes I would like to see
- Any company making a direct offer to the public like this should introduce an extra level of corporate governance in its processes prior to issuing bonds to the public. This should include the appointment of non-executive Directors to the Board, who are specifically mandated to be responsible to bond holders to ensure that the company remains in a position to pay back the unsecured loans it raises.
- The terms of the loan cannot preclude an investor selling his, or her, interest in the bond to a third party at any time in the process.
I originally requested that the company accounts should be displayed prominently next to the offer document. I am pleased to say that these were by Ecotricity Group Ltd and I had simply not found them. The last five years sets of accounts are displayed and available and apologise to Ecotricity for this error.
Investor rights
My concern is that the contract on offer from Ecotricity leaves retail investors unrepresented and low on the list of creditors in the event of liquidation. I would like those who follow Ecotricity to think more about the rights they give to investors, in particular the right to sell their interest to a third party. These rights however cause regulatory and cost issues which companies want to avoid and so regulation is driving a worse deal for investors. Ecotricity Group Ltd have followed the King of Shaves and Hotel Chocolat into direct bond offers to investors, all of which set a dangerous precedent for other companies to follow. The lack of investor rights could ultimately lead to allegations of mis-selling and damage future financing for companies and in particular renewable companies, such as Ecotricity. A few sensible changes to the law which meet both company cost concerns and investors' rights might prevent a future scandal.
As an Ecotricity customer (for over five years) I'm surprised they didn't write to me to tell me about the Ecobond 2 - or at least include some information in their bill. Having scoured the ecotricity.co.uk website, it appears that Ecotricity customers get an extra 0.5% yield on the bond - totalling 6.5%. Perhaps they feel that there will be enough non-customer demand to fill the book without yielding the extra 0.5%.
By James Wrighton on Nov 16, 2011 at 09:51 PM
There was a massive demand for these bonds which probably explains the poor communication with Ecotricity's own customer base.
Agree with Mark on the transparency issue as I think very few investors know exactly what they are getting into with this bond.
By John Ditchfield on Nov 23, 2011 at 10:15 AM
I have to add an addendum to my original comment. Ecotricity saw my post and very rapidly contacted me to point out that they had emailed me on two previous occasions to make me aware of the forthcoming bond. They are currently unable to add info to their bills and didn't want to create more waste with a bespoke mailshot. I was unaware of this, and absent-minded enough not to remember the emails. At least it shows that good service isn't quite dead in the UK and the quick follow-up demonstrates Ecotricity's commitment to engaging with their customers.
By James Wrighton on Nov 25, 2011 at 04:22 PM