Bradford & Bingley Shareholder Action Group

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Bradford & Bingley Plc was nationalised in September 2008. All the ordinary shares in the company were confiscated by the Government, although a Compensation Order was created to allegedly give shareholders fair compensation for their shares. That Order appointed an Independent Valuer who produced a compensation figure of "nil" in his Assessment Notice published on the 5th July 2010. The subordinated bondholders (formerly called PIBS) have also been affected because the nationalisation effectively determined a wind-up of the company in due course, and the retail branch network was immediately sold off to Santander. The bonds were undated and continued to be traded (i.e. were not confiscated). But subsequently the company ceased paying interest on the subordinated bonds, destroying most of their capital value but offers to buy back the bonds were subsequently made - initially at a very low value.

 

This Group was formed soon after the nationalisation of the company and was later incorporated in the form of a "company limited by guarantee" (i.e. a non-profit making organisation controlled by its members). It is currently chaired by David Blundell and run by an executive committee of other former B&B shareholders and bondholders. A photo of one of the public meetings held by this Group in October 2009 is shown above.

 

The nationalisation of Bradford & Bingley was done exceedingly rapidly, with no consultation or political debate (and using the legislation created primarily to deal with Northern Rock). Many shareholders feel particularly disgruntled because they subscribed for a major rights issue only a few weeks before nationalisation. The money raised by that rights issue was supposed to put the company on a sound financial footing for many months, and create a balance sheet with capital ratios stronger than most other banks.

Why Was the Company Nationalised? 

The announcement by the UK Treasury on the 29th September 2008 stated “The FSA determined on Saturday morning that the firm no longer met its threshold conditions for operating as a deposit taker under the Financial Services and Markets Act 2000 and FSA rules”, but no more details were given. In reality this was misleading because if any such "determination" had been made then the company's banking license would have been immediately withdrawn, but that did not happen.

The “Transfer Order” also stated “It appears to the Treasury to be desirable to make this Order for the following purpose: maintaining the stability of the UK financial system in circumstances where the Treasury consider that there would be a serious threat to its stability if the Order were not made.” 

So what exactly were the nature of these threats to the financial system and specifically the breaches of compliance with deposit taking regulations? Was the company insolvent or about to run out of cash? Shareholders will certainly not have expected either to apply bearing in mind the large amount of cash raised by the rights issue.  Although the share price had collapsed in the last few days (it closed at 20p on the Friday before nationalisation when it had been as high as £3 in the past year), which clearly indicated some lack of confidence that the company could continue, share price volatility does not by itself affect the operations of a company. 

Despite repeated requests for explanations on why it was nationalised, we have never received a satisfactory answer. In addition it is worth pointing out that the Government supported other banks in difficulties such as HBOS and RBS with secret loans and subsequently bailed them out by encouraging the former to merge to Lloyds and recapitalising RBS. Why was Bradford & Bingley chosen to be destroyed when we believe it was a going concern? So the key questions that shareholders have is:

1. The exact reason for the nationalisation of the company and the necessity to confiscate the property of the ordinary shareholders (as the owners of the business). 

2. Whether the rights issues should have been permitted to proceed and whether shareholders were wrongly induced to subscribe to it, when it seems that this fund raising was insufficient to stabilize the company so that only a few weeks later the Government found it necessary to intervene. 

3. Whether the comments concerning the strength of the company, only a few days before nationalisation took place, from the directors and from the investors relations department were misleading. 

The Valuation of the Ordinary Shares

The Compensation Scheme Order for Bradford & Bingley shareholders as published by the Government is present at: www.opsi.gov.uk/si/si2008/draft/ukdsi_9780111471180_en_1 . Unlike that for Northern Rock, no artificial assumption of the company being in administration was placed on the valuation process and terms of reference, but that did not mean that the valuation was fair as the Government argued that the company was worthless (see below also for information that subsequently came to light). One of our Executive Committee members produced the following note in 2009 which gives some idea as to the approach we believe should have been taken to valuing the company, and our views on the relevant factors that should have been taken into account: Valuation

The valuer appointed by the Government was Peter Clokey of PWC and he reported his findings in July 2010. The value suggested was zero, i.e. shareholders would get no compensation for the ordinary shares.

A submission made by Charles Fussell (a solicitor who was acting on behalf of this Group) to Mr Clokey in February 2010 is present in this document: Submission. After the Assessment Notice was issued by Mr Clokey, the Independent Valuer, our Chairman made the following submission: Valuation_Response

Latest Summary

A document that summarises all the issues that have come to light on this case was issued in October 2017 and is present here: Update_029

Other Issues and Representations

Note that this Group has done a lot of work on other aspects of this matter, including numerous representations to Government ministers and to other politicians. A number of press releases have also been issued to try and ensure that the wider public is informed about the poor treatment of the shareholders and bondholders.

Subordinated Bonds (PIBS)

Please go to this page for more information on the status of the perpetual subordinated bonds (formerly called PIBS): Subordinated_Bonds

Note that if you have a general interest in stock market investment and the rights of shareholders then you might like to consider membership of ShareSoc (the UK Individual Shareholders Society - see www.sharesoc.org for more information).

 


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