Would you buy bonds in HS2, to finance the Eastern leg between Birmingham, Sheffield and Leeds?

[gerryuk]

So HS2 with Government approval decide to reinstate the construction of the line from Birmingham to Manchester and the entire Eastern arm, to Sheffield and Leeds. To finance this they decide to sell bonds. Anybody can buy the bonds from the ordinary Joe Bloggs to financial institutions. The Government decides that, as this is a infrastructure programme they will not tax any profits that the bond holders get annually, or when they sell the bonds.
I believe that the new high speed line in Florida is being financed this way by selling bonds, no public money is involved. Again there will be no tax to pay for the bond holders in the USA.
Would this be a better way to pay for these large infrastructure projects, and if available would you purchase these bonds?

 

[Bletchleyite]

I might put a hundred quid in (I have on a few other startup-y things) but not serious money.

 

[Mcr Warrior]

Got to be up there with "investing" in bitcoin, high income 'precipice' bonds and/or Northern Rock. So, why not?

 

[pokemonsuper9]

I might put a hundred quid in (I have on a few other startup-y things) but not serious money.

I'd be in a similar spot.
Would be cool to say that I directly helped pay for a train related project, and a big one at that.

 

[renegademaster]

Ultimately This is not any different from normal government borrowing just even more expensive

 

[HSTEd]

You are extremely unlikely to raise tens of billions of pounds in bonds from public subscription.

The project budget is far too high for that, you might be able to raise hundreds of millions but that would be it.

 

[NoRoute]

... The Government decides that, as this is a infrastructure programme they will not tax any profits that the bond holders get annually, or when they sell the bonds.
...
Would this be a better way to pay for these large infrastructure projects, and if available would you purchase these bonds?

Typically bonds pay out interest (either a fixed rate or linked to an inflation index) on the value of the bond, so as a bond holder your payments are not directly linked to the profits of the underlying business, other than in the case of the business getting into real trouble when they might stop paying interest for a while, or worse, go bankrupt with the value of your bonds being written down or off. Bond holders rank higher than shareholders so they get paid before shareholders, who do receive profits from the business via dividend payments on their shares, or if the business retains the profits, from owning a share of the now more valuable business.

To even consider buying a bond in a notional HS2 project you want to know some basics like how much of the funding is coming from the bond holders, how much is coming from the shareholders and how comfortably would the earnings from HS2 cover the bond interest payments before you risked taking a loss.

If you are expecting the Government to underwrite the payments to bondholders, then in practice it's no different from the Government borrowing the money directly, which is likely to be the lower cost option.

Given the huge cost of HS2 and dubious economics, I can't see it being investable.

 

[Mike Machin]

Nope!

 

[cuemaster]

As a bond holder would there be future perks…perhaps a few free trips per annum anywhere on the high-speed network?

 

[Harpers Tate]

How about a {similar to} timeshare model. You buy an investment to help fund construction. Your investment gives you a number of "points" annually depending on the amount invested, and that can be exchanged for travel.

 

[AlastairFraser]

So HS2 with Government approval decide to reinstate the construction of the line from Birmingham to Manchester and the entire Eastern arm, to Sheffield and Leeds. To finance this they decide to sell bonds. Anybody can buy the bonds from the ordinary Joe Bloggs to financial institutions. The Government decides that, as this is a infrastructure programme they will not tax any profits that the bond holders get annually, or when they sell the bonds.
I believe that the new high speed line in Florida is being financed this way by selling bonds, no public money is involved. Again there will be no tax to pay for the bond holders in the USA.
Would this be a better way to pay for these large infrastructure projects, and if available would you purchase these bonds?

I would buy NPR bonds, but not HS2. The potential to take traffic off the M62 and other trans-Pennine routes is insane, and there are no real alternatives to the congested motorways/railways across. There are North-South, including a transport mode which would never be viable transpennine (air travel).
The success of it could also mean a new Manchester to Sheffield high speed line, to which I would also subscribe - a route with even more subpar existing transport options.

 

[Krokodil]

Say it started as just for Phase 2A (west). That would be more palatable until the concept is proven.

 

[gerryuk]

Here is how Brightline in Florida was financed.

 

[AlastairFraser]

Say it started as just for Phase 2A (west). That would be more palatable until the concept is proven.

Problem is phase 2A doesn't really deliver a colossal improvement without the Golborne link.
With HS2 2B east, you'd have a point and you could break it down further into dedicated high speed line Birmingham - East Midlands Parkway (EMP), Meadowhall high speed station, Erewash Valley/Wakefield line/MML Old Road upgrade including wires as bond issue round 1.

Then a dedicated EMP to Leeds high speed line with a second round of bond issue.