Chocolate lovers may have something rare to sink their teeth into with the issue of the UK's first ever chocolate bond, where investors can make significant returns in the form of chocolate rather than cash.
UK-based confectioner Hotel Chocolat hopes to raise 5 million pounds ($7.2 million) by enticing some of its 100,000 Chocolate Tasting Club members -- who already pay for regular home deliveries -- to put their money where their mouths are.
Rather than standard cash coupons that bonds usually pay, chocolate lovers will be paid out in their favorite indulgence: monthly Tasting Club chocolate boxes.
For an initial layout of 2,000 or 4,000 pounds, the prospective bondholders can expect an annual yield of 6.72 percent or 7.29 percent respectively on the three-year bonds based on the value of the boxes of confectionery.
We have ambitious plans for the future and, when it came to considering the funding of these plans, we decided to think somewhat differently, said Angus Thirlwell, co-founder and chief executive of the Hotel Chocolat family of companies.
The transaction is an alternative to bank loan financing as its size is too small for a typical bond issue, even one targeted at retail as opposed to institutional investors.
Rather than borrow in the traditional way and pay interest to a big bank, we would much prefer to provide a return to our customers - in chocolate - through a Chocolate Bond.
Hotel Chocolat has appointed accounting firm BDO to advise on the bond issue and to act as sponsor in order to meet approvals of the Financial Services Authority.
The borrower has the option to pay back the debt before the final maturity date.
The proceeds of the sales will be used to expand the company's factory in Cambridgeshire, helping to create up to 250 new jobs, as well as adding to its retail store portfolio, with the further creation of up to 150 jobs.
The company also plans to expand further overseas and to create an eco chocolate factory at its cocoa plantation in St Lucia.
Hotel Chocolat currently has 40 stores in the UK. It opened its first two U.S. stores in October last year followed by other outlets in the Middle East during the first quarter of 2010.
Among current benefits offered to Hotel Chocolat's Tasting Club members are a 5 percent discount on purchases, exclusive members-only special offers and a new selection of chocolates available each month.
The offer will be opened to members this week. Issuance is conditional upon valid applications received by July 12 2010 and on offers amounting to, in aggregate, not less than 500,000 pounds.
(Reporting by Natalie Harrison; Editing by Jon Loades-Carter)