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Market sniffs warily at 'bonus' Global-e Bonds

Friday 17th March 2000

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By Chris Hutching

Investment lottery Global-e Bonds visited financial services firms in provincial towns this week in a bid to raise $25 million by its target date of July 7.

Reaction to the promoters ranged from caution and scepticism to outright hostility to the unusual bond offer, which offers cash prizes in lieu of high returns over the 20-year term of the investment.

The immediate former employer of general manager Philip Markwick, Equitable, was incensed at the use of its name in advertising material and took legal advice. Mr Markwick spent five yeas with Equitable, where he said he built the investment book six-fold, restructured the company and introduced new products.

Meanwhile, at least 60 brokers have already registered their interest in distributing the product, according to Mr Markwick.

But financial advisers suggested caution and most said they would be reluctant to advise investors to take much exposure to the bonds.

That may change though. According to Mr Markwick, an advertising campaign aimed at retail investors would see Global E-Bonds pressure advisory firms to take a closer interest. The appropriate exposure for an investor was entirely dependent on its individual "investment culture," he said.

Global-e Bonds offers a 1% per annum return over the 20-year term of the $2200 bond - but with cash prizes along the way, a bit like Bonus Bonds.

The first prize of $500,000 will be drawn when the $25 million milestone is reached. The prizes are paid from 40% of the proceeds raised, retained for this purpose. Another third will be invested in US government bonds and the balance used to develop an internet company with associated purchasing benefits for bondholders. They also receive options to buy shares in Global-e Investments.

Mr Markwick said the idea was developed partly by himself, chief executive Damian Archbold and Ron Ryan, both US businessmen with a history in bond investments and directors and shareholders in the promoting company, Global-e Investments. Other shareholders had injected $5.5 million of equity into the company and were charged to boost this to $7.5 million by June 30, according to Mr Markwick.

Stoking some of the scepticism facing Global-e Investments this week was its own ambitious target of raising $1 billion from the bond issue.

Mr Markwick remains confident most of this money will be raised from overseas investors. But he admits benchmarking the bond with other offerings in the marketplace would be difficult because there were no others quite like it.

"We'd be looking to sell the entire series [the balance of the $US1 billion] in 12 to 15 months."

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