Field Fisher Waterhouse advises Kent Reliance on new innovative business structure
17 November 2010
Field Fisher Waterhouse LLP has advised Kent Reliance Building
Society (KRBS) on an innovative transaction to establish an
entirely new business structure that will allow the business to
benefit from substantial new equity capital from funds advised by
US private equity firm J.C. Flowers. This project was first
announced in August 2010 and KRBS has recently mailed full details
of the proposals to its eligible members.
The new structure provides a solution to a problem besetting
many building societies – how to raise core tier one capital, the
highest tier of regulatory capital which building societies and
banks need to support their lending businesses. Whilst a company
can raise core tier one capital by issuing ordinary shares, this
route is not open to building societies. The kinds of financial
instruments that building societies can issue that would count for
this purpose are not attractive to investors.
This solution involves an innovative use of the provisions of
the Butterfill Act by providing for a transfer of KRBS’s business
to a subsidiary of a new industrial and provident society (Kent
Reliance Provident Society Limited), which members of KRBS will be
entitled to join as members. The subsidiary, which is to be a bank
(subject to authorisation by the FSA), will then issue shares to a
company that is a subsidiary of funds advised by private equity
firm J.C. Flowers. The J.C. Flowers company will invest £50 million
in shares of the bank to provide the new business with substantial
new capital.
The transaction is currently scheduled to complete in February
2011, subject to the satisfaction of various conditions, which
include approval by members, authorisation of the new bank and
confirmation of the transfer by the FSA.
The team at Field Fisher Waterhouse which is advising KRBS on
this new business structure is led by corporate partner Nicholas
Thompsell, assisted by a large team including partners Neil Palmer,
Gonzalo Fernandez, Tim Bee, David Wilkinson, Nick Noble and Simon
Briskman.
J.C. Flowers was advised by Macfarlanes LLP.
Nicholas Thompsell said:
“Kent Reliance has always had a reputation for innovation
and this transaction is no exception. We were delighted to be able
to bring our special experience in the mutuals sector to help it
establish what is in effect a brand new form of financial
institution – a mutually-owned, private equity-backed
bank.”
For further press information, please
contact:
Louise Eckersley, PR Manager,
Field Fisher Waterhouse LLP on +44 (0)20 7861 4120.
Notes for Editors:
The full name of the Butterfill Act, (so-called after its
sponsor) is the Building Societies (Funding) and Mutual Societies
Transfers Act 2007. This Act was designed to allow transfers
between different types of mutual organisation.
This transaction is only the second to take place using the
Butterfill Act. The first was the acquisition by the Cooperative
Group of the Britannia Building Society.