Partner Article

NBS bolsters its books

Newcastle Building Society is reportedly strengthening its financial position by using a new form of financial instrument called Profit Participating Deferred Shares (PPDS).

The society has introduced a conversion feature whuich would allow it to switch £46m worth of its existing funds into safer capital (the PPDS) if its financial position were to be weakened in future.

The move would have the effect of strengthening the society’s capital position if needs be.

It has offered more favourable terms to existing creditors for agreeing to the change. The conversion would be triggered if the society’s core tier one capital ratio - a key measure of its capital strength - fell below 5%.

It applies to a proportion of its subordinated debt and permanent interest bearing shares (PIBS) - special shares issued by building societies that pay a guaranteed fixed return.

Newcastle is the first building society to volunteer to use PPDS as a pre-emptive measure. The financial tool has been used by other societies in the recent past, but in different circumstances.

This was posted in Bdaily's Members' News section by Ruth Mitchell .