Page 219 - Bank Case Studies

If the customer ‘s business continued to seriously

deteriorate then SRM, in consultation with GRG would pass
it on to GRG which would apply a range of financial tools

each of which would incur a financial cost to the customer.

The customer was in effect transferred to GRG’s subsidiary,

known as ‘West Register’ where the customer would be

required to either agree a Property Participation Fee

Agreement (PPFA) and/or would require new shares to be

created and sold to West Register for a pittance. (12,15)

The PPFA was essentially a contract on a new loan which

provided for a return or payment from the Bank’s customer,
and which was linked to the value of the customer's asset(s)

a commercial property (or properties) and/or an equitable

stake in the business. The customer could be instructed to

sell off assets to pay down the loans to get the LTV rate

below the new rate, which varied between 50% and 65%.

PPFA allowed the Bank to secure large participation in the

value of customers’ assets. A business would usually be

offered a new loan, with extortionate and often complex fee

structures.