UK retail bond market to top £1bn of issues The UK's retail bond market is set to exceed £1bn of issuance this year as companies turn towards borrowing from their customers amid a decline in bank lending. The issuances from St Modwen, the property developer, and the London Stock Exchange, are expected to raise at least £350m, which will pull the total issuance near the £1.3bn mark for the year for the first time. The LSE's Order Book for Retail Bonds (Orb) platform, where retail bonds trade, was launched in February 2010 and about £2.5bn has now been raised from retail investors looking for higher-yielding investments. "As banks delever their balance sheets and reprice lending to mid-market and smaller corporates, there is a huge incentive for these companies to access the capital markets in this way," said Eden Riche, head of corporate debt origination at Investec. The market started with big companies such as Royal Bank of Scotland, Tesco Bank and National Grid issuing bonds in multiple tranches. But in recent months it has attracted a more diverse range of mid-market companies such as interdealer broker ICAP and specialist lender Intermediate Capital Group. Advocates argue it is on its way to becoming a large and fully functioning market similar to those in Italy and Germany. The UK market is still small by comparison, however, and the bonds are hard to trade on the illiquid secondary market. Demand for the products has been stoked by the low yield on government bonds and low bank rates, which makes the more than 5 per cent coupon typically available on retail bonds relatively attractive. As well as a favourable coupon level, investors have been attracted by relatively low minimum investment requirements - typically about £2,000 - and, in some cases, structures that protect against inflation. Jamie Hopkins, chief executive of Workspace Group, a provider of small business premises in and around London, which recently issued a retail bond, said last month: "[The issue] offered us an opportunity to diversify our funding base and there is clearly an appetite for this sort of thing at the moment." The LSE last week closed the books on a £300m bond, although it is not issuing until November 2. St Modwen, which owns the Elephant & Castle shopping centre in southeast London, is aiming to raise between £50m and £100m from an issue of unsecured bonds. The St Modwen bonds will offer investors a 6.25 per cent coupon and will mature in November 2019. St Modwen's payment compares with the 5.375 per cent offered by the retail bonds from NHS landlord Primary Health Properties and the 5.5 per cent from lettings group CLS. The LSE bond offered a lower coupon of 4.75 per cent.