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Bradford & Bingley & Northern Rock Bond Tenders

Bradford & Bingley Plc have announced a new tender offer for the subordinated bonds. These are what were formerly called PIBS which were issued before the company converted to a bank. These bonds remained outstanding when the company was nationalised in 2008 and have continued to be listed and tradable. But the previous tender offers were not considered very generous, although the market price has been slowly recovering on the expectation that the mortgage assets of the company would exceed its liabilities and enable repayment in due course as the company was wound up. No interest payments have been made in the meantime, and no accrued interest will be payable if the tender is accepted.

The new offers are 199.00p for 100p nominal of the 13% bonds, and 186.5p per 100p nominal of the 11.625% bonds which are the ones most retail investors held. If the majority of the bondholders accept the tender offer then the company will have the right to purchase all the remaining bonds at the tender price. It seems likely that the majority of bondholders will accept this new tender offer.

Holders of these bonds should receive documentation on this matter, although it is somewhat complex and difficult to understand for retail investors. See this announcement for more details: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/12166576.html

Similar proposals have been made in respected of the Northern Rock subordinated bonds.

Roger Lawson

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