In his hilarious and very persuasive presentation in 'The Treasurers hunt for funding' stream at the ACT Annual Conference 2012 in Liverpool, Andrew Kluth showed why other corporates should consider issuing their own Retail Bond. National Grid have found that Retail Bonds offer important: opportunities for funding diversification from FIs, access to a new investor base of some £500bn which is less sensitive to condition of the markets, and investors are not driven by benchmarks. The National Grid Retail Bond also addressed the demand for inflation linked assets from retail investors and the need for index linked liabilities for National Grid.

Andrew's main advice on the mechanics of issuing a Retail Bond was that it is not as onerous to do this within treasury as many expect. National Grid found that the funding % savings more than paid for the FTE(s) needed to run the programme. Furthermore, the key documents and procedures are now well-established and other corporates are more than willing to help, as existing retail bond issuers believe that the market needs to expand. Other advice  included making sure that you: issue a comprehensive information booklet about the programme with clearly defined examples, describe how investors can subscribe and who are the Authorised Distributers for the programme, and set up a marketing and communications programme that gets the message over to key investors.

It took only nine weeks from the setting up of  the programme to beginning to receive the proceeds. National Grid raised £260m initially, subsequently increased to £272.5m and finally to £282.5m at a  real interest rate of 1.25% .  (This was equivalent to 1.65% above the benchmark Index-Linked Gilt.)

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Although National Grid are fortunate in that they have index linked  assets - gas and electricity, there are many other companies, such as Water Companies, which have assets which could be used to back Retail Bonds. Surely, in today's difficult markets, there will be many more Retail Bonds?