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Nationwide offers to buy back Pibs in bid to boost capital

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Nationwide Building Society has offered to buy back up to £715m in permanent interest bearing shares from investors in a bid to shore up its capital.

The tender offer is voluntary, so investors do not have to sell back their Pibs to the building society.

Pibs are fixed-interest securities issued by building societies and can be traded on the London Stock Exchange. Building societies cannot issue standard shares so buying back debt is one of the few ways they can raise capital.

The building society came under fire from the Prudential Regulation Authority in June for not holding enough capital. The PRA requires banks and building societies to hold a risk-weighted capital of 7 per cent and a leverage ratio of 3 per cent. Though in line with Basel III requirements, UK banks and building societies will have to comply with the requirements by 2015, three years than set out under Basel III.

Nationwide says the PRA has not forced the building society into the tender offer, although it says the regulator has been consulted.

A spokesman adds: “We are inviting holders of five of our Pibs securities to voluntarily tender them for purchase. The tender offer is a standard transaction in the market place and it’s simply part of our proactive approach to capital management.”

The spokesman could not confirm the price offered on the securities but said it would be “above current market price”.

Institutional investors have until 4pm on 9 September to take up the offer while non-institutional investors, which are classified as those holding no more than £100,000 in Pibs, have until 4pm on 24 September.

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