Kent Reliance to transfer assets to bank structure
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Kent Reliance Building Society is to transfer its business, assets and liabilities to a new bank to be created out of a restructuring deal with private equity firm J.C. Flowers.
The terms of the deal, announced today, will see a new industrial and provident society set up called Kent Reliance Provident Society Limited.
The UK’s 12th largest building society will transfer its members savings, investment accounts and mortgages to a new banking subsidiary wholly owned by KPRS and is expected to trade under the names Kent Reliance Banking Services, Kent Reliance, and KRBS.
J.C. Flowers will put up £50m in capital to the new bank vehicle once Kent Reliance’s assets have been transferred. This will mean that Kent Reliance will be able to raise capital by issuing shares through the bank. Under its building society structure Kent Reliance could only generate capital mainly through profits.
The Kent Reliance bank will then issue ordinary and convertible preference shares to a J.C. Flowers investment vehicle with a subscription price of £50m.
The transfer of assets to the bank is expected to be carried out next year, subject to approval by the FSA and society members at a special general meeting to be held in the autumn.
The bank’s board will be made up of both KPRS and J.C. Flowers representatives.
Permanent interest bearing shares previously issued by the society will be replaced by bank subordinated debt instruments.
Kent Reliance chief executive Mike Lazenby says the structure allows for a capital injection while allowing members to remain members of a mutual.
He says: “We firmly believe that businesses based on mutuality have a major role to play in protecting and promoting consumer interests, but, to play this role to the full, we now need to bring fresh capital into the business to take us forward into the future.”
J.C. Flowers managing director Europe and Asia Pacific David Morgan says: “We are very pleased to join forces with Kent Reliance. Our investment will enable members to benefit from a broader array of quality products and services with the support of a strong capital partner. We look forward to supporting the future development of the business.”
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