West Bromwich BS Seals Debt Deal

Fri, 12 Jun 2009

West Bromwich Building Society has announced that it has reached an agreement with debt-holders to boost its capital strength, following growing concerns over the health of the firm.

Under the agreement, the UK’s eight biggest building society will convert £182.5 million pounds of debts into high quality capital, which will "significantly" boost its position and allow it to keep its independence.

West Bromwich said such an arrangement was needed because stress tests by the Financial Services Authority (FSA) had increasingly focused on building societies' levels of capital, particularly "core tier 1" which has the ability to absorb losses.

The news of the deal comes after the lender posted a pre- tax loss of £48.8 million for the year to March 31, fuelling speculation that the West Midlands-based group could be sold and broken up.

However, West Bromwich chief executive Robert Sharpe, stressed that the firm would retain its independence.

"We have absolutely no plans to merge with anyone as I have said consistently over the last few weeks," he said. "We have never been in merger talks with anyone."

He added: "Following the transaction signed overnight we now have one of the strongest tier 1 capitals in the building society sector."

"We have the right strategy and strength of capital position to enable us to look to the future, as an independent mutual society, with confidence."

The mutual, which has almost 600,000 members, said it planned to be predominantly funded by traditional retail savings in the future.
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