DBRS Takes Various Rating Actions on Bradford & Bingley plc

DBRS has today downgraded Bradford & Bingley plc’s (B&B or the Company) Subordinated Note rating to B from BBB and Bradford & Bingley Capital Funding, L.P.’s Perpetual Preferred Securities rating to B (low) from BBB (low). The trend on both ratings is Negative. All others ratings, which includes BBB (high) Deposit and Long-Term Senior debt ratings, remain under review with Developing implications where they were placed on 29 September 2008.

Today’s rating action reflects DBRS’s concerns that the recent passage of the Bradford & Bingley plc Transfer of Securities and Property etc (Amendment) Order 2009 (the 2009 Order) increases the probability that holders of Bradford & Bingley’s subordinated debt will not receive timely payment of interest and principal when due and holders of perpetual preferred securities are less likely to receive scheduled distributions. The 2009 Order clarifies that amounts of principal and interest which would otherwise come due and payable to holders of dated subordinated debt issued by Bradford & Bingley may be deferred until the Company’s debt to the Financial Services Compensation Scheme (FSCS) has been repaid. The decision whether to defer payment or not remains a decision of the Board of Bradford & Bingley.

DBRS acknowledges Bradford & Bingely’s 25 February 2009 announcement of its intention to pay upcoming subordinated note interest due on three subordinated note instruments. However, going forward DBRS believes that Bradford & Bingley may choose to temporarily forgo principal and interest payments when due in order to conserve capital to support the Company.

DBRS will continue to monitor statements and actions by Bradford & Bingley’s Board towards these instruments, providing comment and may take further rating actions as warranted. Furthermore, DBRS continues to monitor the status of the guarantee arrangements put in place by HM Treasury to safeguard certain wholesale borrowings, and derivatives transactions of, and wholesale deposits with Bradford and Bingley. The Treasury has sought approval from the European Commission to approve the continuation of the guarantee arrangements. The guarantee arrangements will remain in place while the Commission considers the Treasury’s request. If approved by the Commission, the guarantee arrangements will continue until the wind-down of Bradford & Bingley is completed. The extension of the guarantee could have a positive rating impact on covered instruments.

Notes:
All figures are in GBP unless noted otherwise.

The applicable methodologies are Analytical Background and Methodology for European Bank Ratings, Second Edition, and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.