No compensation for former B&B shareholders

5 July 2010 0:00 am | Updated: 5 July 2010 4:19 pm | By Natalie Holt

Peter Clokey, the independent valuer for the Bradford & Bingley compensation scheme, has ruled that the Treasury is not liable to pay any compensation to former shareholders in the nationalised bank.

Former holders of subscription rights are also not eligible for compensation.

B&B was transferred into public ownership in September 2008, with its retail and branch network sold to Santander.

Clokey, who is also a partner at PricewaterhouseCoopers, says that had the bank not been taken into public ownership it would have been unable to continue as a going concern and consequently would have had to file for administration.

He calculates that this would have allowed for the repayment of the principal outstanding amounts on B&B’s debts, minus what was owed to subordinated bond holders.

Administration would have generated approximately £5bn to be used to meet post-administration interest, giving eligible creditors a yield equivalent of about 2.7 per cent - significantly below the 8 per cent rate at which creditors would qualify for monies.

In his assessment notice Clokey says: “Accordingly, no residual surplus would be available for distribution to shareholders. I therefore determine that immediately before the transfer time the ordinary shares in B&B had no value; and it follows that immediately before the transfer time the subscription rights also had no value.

“I therefore determine that no compensation is payable under the scheme to shareholders or to holders of subscription rights shareholders.”

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