West Bromwich building society in debt-for-equity swap

The West Bromwich building society is to boost its capital ratios after racking up a big annual loss.

A debt-for-equity swap will see bonds switched to Profit Participating Deferred Shares (PPDS), increasing the firm’s Tier 1 capital ratio from 6.8 to 11.6 per cent.

Reports suggest that the Treasury has been trying for weeks to find a buyer for the struggling building society - which suffered credit crunch-related losses of £48 million this year.

The move is the latest government intervention in the financial services sector - and follows the rescue deal for the Dunfermline building society launched earlier in 2009.

Last year, with the financial crisis at its worst, the Treasury part-nationalised RBS, HBOS and Lloyds TSB in a £37 billion bailout and took over Northern Rock and Bradford & Bingley entirely.

’The PPDS constitute permanent deferred shares in the society and have no specified final maturity or repayment date,’ the West Bromwich confirmed today.

In a statement, the Financial Services Authority added: ’PPDS will take the legal form of a deferred share … but instead of paying a fixed coupon it may pay up to a fixed percentage of profits as a dividend on a fully discretionary basis.’ADNFCR-2318-ID-19216388-ADNFCR