5:07pm Monday 1st June 2009
By Chris Holland
Treasury ministers have been accused of “gross misrepresentation” over a decision not to pay the next instalment of interest to holders of bonds in nationalised lender Bradford & Bingley.
The group representing B&B shareholders is also beefing up its campaign for compensation after the break-up of the business last year.
The bank said it will miss payments on some of its perpetual subordinated bonds due in June and July. There were originally issued as lump sum fixed interest investments when B&B was a building society.
The investments were originally called Permanent Investment Bearing Shares (Pibs).
The decision follows the passing of a new law in February which altered the terms of outstanding subordinated bonds issued by Bradford & Bingley. It means the lender can defer interest payment on these bonds.
It means missing payments on £125 million of subordinated investments due to mature in June 2023 and £150 million due to mature in march 2054.
Angry investors’ representatives are questioning the move and wondering whether bondholders will receive any more interest.
Roger Lawson, spokesman for the UK Shareholders Association, said: “This is of course exceedingly bad news for all the subordinated bond holders and it is not at all clear why the company has chosen to cease payment. Is it a case of can’t pay or won’t pay?
“Press comment seems to suggest that the Government is trying to ensure it gets its money back as a priority over all other debtors and hence is prejudicing the bondholders.
“We will try and find out more background for the reasons for this decision, but it emphasises that the bondholders are now totally at the mercy of the Government and so far they have taken no notice of our representations on this matter.”
Mr Lawson said statements by Treasury ministers that nationalisation of B&B had not affected the position of bondholders had grossly misrepresented the reality of the situation.
He said: “It is blatant misrepresentation to suggest that the risk profile of the company and of their investment so far as holders of the undated subordinated debt is concerned, has not changed very substantially.”
Meanwhile, the Bradford & Bingley Shareholders’ Action Group, which is campaigning for compensation for shareholders of the bank, is planning a public meeting in London in October.
It aims to build on the success of a meeting in Bingley earlier this year and to keep up pressure on ministers to appoint a valuer for the business.
It is also looking to recruit regional volunteers to run its campaign across the country.
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