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Deal will hopefully save it from collapse
A deal, due to complete by the end of July, has been announced that will save the West Bromwich Building Society from the brink of collapse. The deal will involve debt for equity swaps with its bondholders.
The building society, the UK’s 8th largest, has a total of 350,000 savers and employs more that 800 staff. The deal will come as a relief to the society who have released figures to show that they have a pre tax loss of £39.3 million compared with a profit in 2008 of £33.1 million. The deal would mean an exchange of its subordinated debt, totalling £182.5 million to profit participating deferred shares. The dividend will pay up to 25 per cent of the mutual’s tax profits.
The chief executive of West Bromwich, Robert Sharpe, said “The exchange of the society’s tier 2 sub-debt into core tier 1 capital, materially strengthens our capital position and under stress-test scenarios, has demonstrated our ability to withstand a further significant deterioration in market conditions.”
The society has 46 branches and is solely owned by its members this means the debt cannot be converted into conventional equity. The West Bromwich has a £1 billion commercial property loan book and a £3 billion Buy to let loan book, its residential loan book is £2.6 billion. The deal seems to be accepted so far by the bondholders who worried that the society would otherwise have been split up. The building society was founded in 1849 as the Co operative Steelworkers’ Society of West Bromwich.
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