Bonds and private placements

What bonds and private placements are

• Listed bond: a tradeable debt security admitted to a market such as the London Stock Exchange, paying a fixed or floating coupon and usually repaid in one payment at maturity.
• Retail bond: a listed bond in small denominations that individuals can buy through a broker. The London Stock Exchange now flags these as Access Bonds.
• Private placement: a medium or long-term debt financing transaction between a listed or unlisted company and a small number of institutional investors, on negotiated documents (ICMA private placement guide, 2015).
• Mini-bond: the FCA says there is no legal definition of a mini-bond, it's essentially an IOU issued by a company (or 'issuer') to an investor in exchange for a fixed rate of interest over a set period. Mini-bonds are usually unlisted and cannot be sold on.

How to work out the all-in cost of a bond or private placement

1. Enter the amount and coupon. Use the size you plan to raise and the coupon your arranger expects.
2. Enter the term and coupon frequency. Bonds are usually repaid in one payment at the end.
3. Add the upfront and running costs. Include arranger, legal, listing, trustee and rating costs, and the yearly running costs.
4. Compare the all-in cost. Compare the effective annual cost with bank or private credit options for the same amount and term.

When companies use them

Listed bonds suit larger, established issuers that want long-dated, fixed-rate funding from a wide investor base. The FCA’s 2026 reforms aim at encouraging corporate bond issuances in smaller, more investible sizes.

Private placements suit medium-sized, unrated, private or listed companies seeking medium- to long term debt finance and diversification from the bank loan market (ICMA private placement guide, 2015).

Mini-bonds are sometimes issued by smaller or customer-facing businesses. The FCA notes they're usually issued by small or start-up companies, or by businesses that find it difficult to raise funds from large investors, or to borrow from banks, and strict promotion rules cover them (see who qualifies).

For small or short-term needs, a term loan, asset-based lending or direct lending is usually quicker and cheaper.

How much companies raise

There is no market minimum for a private placement; the guide says it will allow for flexibility in the size of issues (ICMA private placement guide, 2015). For HMRC’s qualifying private placement tax exemption, Regulation 4(3) requires the relevant security to have a minimum value of £10m.

Historical retail bond practice (pre-2026): the London Stock Exchange ORB guide, 2014 quoted an Issue size £25/30 million +, and said the minimum issue size required to ensure liquidity in the secondary market is £50m. The London Stock Exchange ORB overview, about 2016 records that issue sizes on the ORB have ranged from £11 million to £300million.

Terms and structure

Retail bonds have usually been bullet, fixed-rate bonds. The London Stock Exchange ORB guide, 2014 lists Structure Bullet and Early redemption Make-whole provision, with tenors between five and a half and 12 years, with the majority between seven - and nine - year maturities. It put the timetable from mandate to closing at six to eight weeks.

Private placements (ICMA private placement guide, 2015) are repayable at maturity or by instalments, and are transferable but largely illiquid. A fixed-rate note repaid early may carry a makewhole amount to compensate the Investors for loss of future interest payments. Standard Loan Market Association templates are governed by English law, assume unsecured transactions.

HMRC’s qualifying private placement rules require a term not exceeding 50 years.

What it costs

Bonds are priced off government bond yields plus a credit spread. The 10-year gilt yield is 5.31% as at 15 October 2026 (Bank of England database (IUDMNPY)); floating-rate debt is priced off SONIA (3.7335% as at 15 October 2026 (Bank of England database (IUDSOIA))). There is no published source for typical SME credit spreads.

The London Stock Exchange ORB guide, 2014 said Retail bonds have paid coupons close to 5%. That was when gilt yields were far lower, so it is not a guide to today’s coupons. The Bank of England notes Spreads tend to widen more sharply in riskier markets during periods of stress.

The fixed costs are high: arranger, legal, listing, trustee, paying agent and rating fees, none of which are published. The London Stock Exchange ORB guide, 2014 warns that With the exception of the lead manager, advisers start charging at an early stage and, if for any reason, the bond is not brought to market, the fees are charged, paid and lost. The FCA’s 2026 rules aim to reduce costs when admitting securities to UK public markets.

Example £50m at a 7% coupon for 7 years, with 1.5% fees, £500,000 of fixed costs and £100,000 a year of running costs, leaves £48.75m and costs about 7.67% a year all-in. A £20m private placement at 6.8% for 7 years, with 0.75% fees, £250,000 of fixed costs and £20,000 a year of running costs, costs about 7.27%. A £5m mini-bond at 8% for 5 years, with 5% fees, £100,000 of fixed costs and £25,000 a year of running costs, costs about 10.4%.

Tax. HMRC’s qualifying private placement exemption removes the duty to deduct income tax from the interest paid, if the conditions are met.

Security, covenants and reporting

Private placements are usually unsecured, and can be capable of benefitting from a guarantee of a guarantor, usually a parent or sister company of the Borrower. Investors want terms in line with your other senior debt so as to reduce the risk of subordination (ICMA private placement guide, 2015).

Expect covenants and reporting. Private placement borrowers handle Compliance with financial covenants and any other covenants and related disclosure and Compilation and reporting of financial information, and events of default include cross default, insolvency and related events. Listed bonds also bring ongoing disclosure and market abuse obligations.

The FCA tells mini-bond investors to check whether the money is secured on any of its assets such as property or land and to look at the issuer’s 'interest cover ratio'. Issuers should expect those questions.

Who can issue them, and the rules

Listed bonds. Admission to a UK regulated market normally needs a prospectus. On 19 January 2026, new rules came into force making it easier for companies to raise capital in the UK and reduce costs when admitting securities to UK public markets, under the Public Offers and Admissions to Trading Regulations 2024. The new regime uses a single disclosure standard for all non-equity securities.

Mini-bonds. The FCA says that from 1 January 2020 it banned the promotion of speculative mini-bonds to consumers, unless they are sophisticated or high net worth investors. Where they are promoted to those investors, issuers must clearly state the risk of losing all the investment. Businesses do not usually need FCA authorisation to issue mini-bonds, But investment services provided by firms relating to mini-bonds are regulated. For investors, there's normally no protection from the Financial Services Compensation Scheme (FSCS). Take legal advice before any issue.

Private placements are sold to primarily institutional Investors such as insurance companies, fund managers and asset management companies. For the tax exemption, the security must be not listed on a recognised stock exchange and meet further conditions (HMRC).

Who is involved

• Investment banks as arrangers and bookrunners for listed bonds.
• Private placement arrangers, usually acting in an agency capacity rather than underwriting the debt.
• Institutional investors: insurers, pension funds and asset managers.
• Retail investors buying Access Bonds through brokers (LSEG).
• Authorised platforms and advisers for mini-bonds, which must comply with FCA rules.
• Trustees, paying agents, lawyers and auditors.

Pros and cons