West Brom is the latest to be saved from
the brink of collapse
West Bromwich BS saved from collapse
West Bromwich Building Society today stepped back from the brink of collapse after announcing a debt-for-equity swap deal with its bondholders.
The deal, which is due to be completed in July, involves the exchange of West Bromwich’s subordinate debt, totalling £182.5 million, for a new instrument, profit-participating deferred shares (PPDS).
The announcement came as the firm released its annual results early, posting a £48.8 million pre-tax loss for the year to the end of March.
The shortfall, caused by losses in buy-to-let, sub-prime and commercial lending, is in comparison with a £47.8m profit for the previous year.
It said that the capital exchange would ‘materially strengthen the society’s core tier 1 capital ratio from 6.8 per cent to 11.6 per cent’, adding, ‘At this level, the society’s core tier 1 capital ratio is amongst, we believe, the highest in the sector.’
A bank or building society’s tier 1 capital is a key measure of financial strength and represents the amount of capital held on the balance sheet as a proportion of a bank's loan book.
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