Tuesday, February 05, 2013

Media investigation reveals Bank of Scotland agreed £12 Million loan to company owned by its former managing director, along with 35 year repayment grace

An investigation by the MAIL ON SUNDAY newspaper has revealed the Bank of Scotland agreed a £12 million loan deal to a company owned by its former managing director & Dunfermline Athletic owner Gavin Masterton, which allows him to skip repayments for the next 35 years …


FEBRUARY 3 2013 The Mail on Sunday
By Andrew Picken

THE Bank of Scotland agreed a £12 million loan deal to a company owned by its former managing director which allows it to skip repayments for the next 35 years.

A Scottish Mail on Sunday investigation can reveal former top banker and Dunfermline Athletic owner Gavin Masterton’s firm was handed the cash in a deal personally approved by disgraced HBOS executive Peter Cummings.

The generous agreement was struck at the height of the global financial crisis, when thousands of Scots were struggling to get mortgages and loans from the now taxpayer-backed bank.

Details of the £12.2 million deal show the 71-year-old’s company does not have to make a single repayment on the debt until 2043, when the full amount is due to be paid back to the bank.

Documents at Companies House state interest is only liable on the loan if his football team’s East End Park ground is ever sold, a move the latest accounts state the club has ‘no plans’ to do.

Mr Masterton yesterday said the deal was ‘approved in the conventional, way’ and insisted interest was accruing on the loan.

But the retired banker declined an invitation to explain why the records at Companies House appear to suggest the loan is effectively interest free as long as the Fife club remains at its current stadium.

Sources close to the deal struck in 2008 claim it was sanctioned by fallen Scots banker Mr Cummings. Mr Masterton is a former mentor of Mr Cummings, who was last year banned from working in the City for the rest of his life following his part in the downfall of Scotland’s oldest bank.

Details of the loan have emerged as Mr Masterton is facing an uphill battle to shore up the finances of his ailing First Division club which has struggled to pay tax and wage bills this season.

Last autumn seven directors -owed more than £500,000 from Dunfermline Athletic quit the Fife football club as the true extent of its financial difficulties was beginning to emerge.

It is understood the former directors wanted to take Dunfermline Athletic out of the group of companies owned by Mr Masterton but he refused.

One source close to the £12.2m loan deal said: ‘There’s not a bank in Scotland which would ordinarily agree to terms this generous. Something stinks.

‘Gavin was Peter’s mentor, they went way back. There is a confidential legal agreement on this deal which spells all this out but Gavin has refused to let anyone see it as he knows it is toxic.’

Dumbarton-based Mr Cummings was the head of HBOS corporate banking from 2006 to 2008, but was last year fined £500,000 by UK financial regulators over his role in the bank’s collapse and banned from ever working in the industry again.

The former tea boy turned corporate banker was accused of epitomising the excesses of the property and buy-out boom of the last decade.

Insiders claim he learned much of his hands-on approach – dubbed ‘handshake banking’ – from his former mentor Mr Masterton, who retired from the Bank of Scotland in 2001.

It is claimed that just as the global financial crisis was getting underway, Mr Masterton turned to his former colleague for a loan to consolidate debts at some of his companies.

According to the latest records at Companies House, East End Park Limited – the Masterton company that owns the stadium and leases it to Dunfermline Athletic – has an outstanding bank loan of £12.2 million which is ‘not repayable in annual instalments’ but is repayable in full in March 2043. East End Park Limited’s parent company is Charlestown Holdings Limited (CHL) – which is wholly owned by Mr Masterton.

CHL’s latest accounts reveal the loan has ‘interest potentially payable at the rate of 2.5 per cent’.

The report goes on to explain the interest ‘only becomes payable upon the disposal of a material part or all of East End Park. The group has no plans to dispose of the property and therefore no provision has been made for interest in the financial statements’. The accounts then state that at May 31, 2011 ‘the potential liability under the loan agreement amounts to £975,165'.

Details of the £12.2 million loan with the Bank of Scotland first appear in the 2007/08 accounts for East End Park Limited and it is understood the deal went through in early 2008 – one year before Mr Cummings was shown the door at HBOS with a £660,000 payoff and £6 million of pension benefits.

A statement issued by Mr Masterton’s solicitor said: ‘The loan with Bank of Scotland was not an interest free loan, as has been suggested. There is interest accruing on the loan, as is disclosed in the relevant accounts.

‘The loan was approved in the conventional way and in accordance with bank policies.‘In the event of a sale, the whole loan and accrued interest are directly payable to the bank. ‘Our client is concerned that information is being disseminated about him, from parties who are simply seeking to destabilise Dunfermline Athletic Football Club for their own interests and personal gain. ‘It is apparent that they do not have the best interests of Dunfermline Athletic Football Club at heart.’

A spokesman for Lloyds Banking Group said: ‘We do not comment on individual customers.’

Mr Cummings could not be contacted at his home.


Anonymous said...

Nice work if you can get it!

Anonymous said...

the loan was approved in the conventional way , as was standard practice ?....... Whats the chances of me walking into a bank and getting a loan , yet not having to pay a penny back for 35 years , now including no interest on it ?

Anonymous said...

I have no recollection of the Bank of Scotland having a "standard practice" of offering loans to customers on the basis that not one penny needed to be paid back before the customers' 101st birthday. Apparently, this is "handshake banking."
We should all have been taught how to do these handshakes.

I note that Cummings was fined £500,000 on one hand while the other hand gave him a £660,000 payoff and £6,000,000 of pensions benefits. We can conclude from this that a man who rips off the taxpayer to the tune of £12,200,000 for a friend's benefit will be rewarded to the tune of £6,160,000 (so long as he knows the right handshakes.)

Why aren't these people in jail?