DIY investors have been left waiting for thousands of pounds in late payments from a £50million retail bond still for sale at Hargreaves Lansdown.
Savers were lured by promises of 6.5% annual interest and a guarantee they would get all their money back this year when Eros Media World, a Bollywood production company, issued a £50m retail bond to the Nine years ago issued London Stock Exchange.
Adem Demir, speaking under a pseudonym, invested thousands of pounds from his pension in the Eros bond. “Eros is a well-known film producer in India and an established company. I know private debt is risky, but this is such a well-known company that I had no reason not to trust it,” he said.
But Mr Demir was left with thousands of pounds out of pocket after the company failed to make a payment due in October. He should have received an 8.5 percent interest payment after a restructuring in 2021 led to an increase in the bond rate. A higher yield usually indicates a higher risk of default.
Eros blamed the delay on “administrative problems” following an internal split. It vowed in November to resolve the issue as soon as possible — but months later, bondholders waiting for their money were met with silence from the company.
“I would never have bought it if I hadn’t seen it on Hargreaves Lansdown,” added Mr Demir. “It’s worrying that it’s still listed there. My concern is that inexperienced investors will see the high yield and just buy it, ignoring the increasingly higher risk of default.” The bond also continued to be available for trading through rival broker Interactive Investor.
Unlike bank deposits, retail bonds are not covered by the Financial Services Compensation Scheme. That means bondholders are likely to lose their money if the issuer goes bust.
In contrast to “mini bonds”, retail bonds can be traded on the stock exchange. The Eros bond is now trading at around £9 compared to its £100 listing.
The Financial Conduct Authority declined to comment, but the City Watchdog is understood to be aware of the issue.
Eros Media did not respond to a request for comment. Hargreaves Lansdown declined to comment.
A spokesman for Interactive Investor said the bond is a “complex product” and investors have been asked to conduct a pre-trade test to confirm its eligibility.
The platform said that while failure to pay interest or dividends will not result in a trading ban, it has contacted the company but has not received any further information.