PIBS holders agree to West Brom rule change
Holders of a special type of West Bromwich Building Society shares have accepted rule changes that will cut costs for the loss-making mutual.
Holders of the West Brom’s stock market-traded permanent interest bearing shares (PIBS) lost money as part of the debt-for-equity swap that saved the 160-year-old being broken after losing millions of pounds on toxic commercial mortgages.
Some £75 million-worth of PIBS are held by about 800 predominantly small investors who saw the 6.15 per cent coupon cut under the terms of the refinancing deal agreed by City regulator the Financial Services Authority.
They were polled by the society and accepted the changes by majorities ranging from 77 per cent to 92 per cent.
Under the life-saving deal, holders of West Brom bonds agreed to convert their holdings into a new type of share called profit participating deferred shares, or PPDSs. Under the terms of the swap, the rate the society pays out of holders of PIBS was cut to an annualised rate of three per cent.
The UK Shareholders Association complained, saying PIBS holders who were under the impression they were buying fixed interest investments would see their income cut.
Changes to the conditions include removing the requirement to call a special general meeting of all the West Brom’s members in order to approve a reduction or cancellation on the interest payment on PIBS.
Such a meeting would, it was estimated, cost up to £125,000 and would reduce profits and payouts to both PIBS and PPDS holders.
The meeting also approve a proposal to scrap the requirement to postpone payments to PPDS holders by up to five months if and when PIBS rates are cut.
Speaking after a meeting in London attended by about ten PIBS holders West Brom chief executive Robert Sharpe said: “We are pleased that PIBS holders have supported these variations to the PIBS conditions as it will result in the society avoiding additional costs, and hence benefits to members.”
He said previously that without the changes that saved the society as an independent entity PIBS holders could have lost their capital investments.