‘Lenders seek review at Manchester Building Society’

THE lenders that bailed out Manchester Building Society – the city centre-based mutual – are reported to have hired an investment bank to oversee a review of its finances.

According to The Sunday Times, Rothschild has been brought in by Nationwide, Britain’s biggest building society, and the other lenders that supported the fundraising in April 2103.

The Manchester, which is based on Portland Street, was forced to raise £18m after racking up losses on a complex insurance contract linked to wholesale borrowing costs.
 
The Manchester’s woes are said to have begun several years ago when it bought an interest- rate swap to shield it from movements in wholesale lending rates.

It lost £1.6m in 2013 after taking an £8.7m write-down. The bulk of this impairment charge is thought to have been connected to the interest-rate swap.

In the first six months of last year the building society made a £1.6m pre-tax profit, although it did not write any new mortgages over that period.

The Sunday Times said Nationwide and the other backers had called in Rothschild to conduct a “valuation assessment” on their 2013 investment. This is widely seen as a prelude to another fundraising by the Manchester, sources said.

The Manchester was founded in 1922 and has 24,000 members. It is the country’s 19th-biggest building society with a loan book of £420m.

Its executives could not be reached for comment.