Crowdcube is now presenting investors with output from Moody’s Analytics’ private company risk model to help them assess the bond investment opportunities listed on the site.
Square Pie and Vanarama are the first to display the new Probability of Default (POD) figure that represents a probability that the business issuing the mini-bond will default on any existing credit obligations.
Mini-bond investors through Crowdcube have already received around ￡300,000 in returns so far in 2015 from interest payments, which are typically paid every six months. More than 2,000 people have invested around ￡10m in mini-bonds on Crowdcube over the last 12 months, including world-renowned tourist attraction Eden Project, award-winning River Cottage and pioneering private property developer Pocket Living, which is backed by the Greater London Authority.
Commenting on the development, Luke Lang, Co-founder at Crowdcube, said: “This represents a major leap forward in helping investors better understand the financial position of companies raising investment through a bond on Crowdcube. We work with established, sophisticated businesses with years of financial performance data under their belts and it is important that we reflect this and are transparent with our community of 200,000 savvy investors.”
Moody's Analytics helps capital markets and credit risk management professionals worldwide. Whilst POD is not a risk rating, it is an approximate measure of the credit-worthiness of the issuer before the mini-bond issue offered via Crowdcube. As such, it should be one of the factors considered by investors when assessing whether the interest rate on offer by the issuer is sufficient for the risk involved – the higher the risk, the higher the return investors should require.
Capita estimates that the value of the mini-bond industry will rise to ￡8 billion by 2017. Luke Lang added: “We’re inundated with established businesses, including high-street brands, who are looking at how a bond can secure growth finance for the business and help them engage more with their customers. Using Moody’s Analytics is part of an ongoing programme of improvements to provide investors with a better experience and reinforce our position as the number one choice for businesses looking to raise finance using a mini-bond.”