According to The Times, the Edinburgh-based bank said that it would extend credit to Grampian, which is engaged in issuing commercial papers, until market conditions improved. Demand for commercial papers, according to the publication, has declined as more and more banks and investors seek to invest in safer government bonds.
The publication also revealed that, as a result of HBOS’s decision to finance the commercial paper issuer with its own resources, it may find itself having to raise GBP19 billion within six months, unless credit conditions improve.
Cited in The Times, HBOS said: Grampian will use facilities provided by HBOS to repay maturing asset-backed commercial paper until such time as market pricing improves to a level acceptable to HBOS.
Meanwhile, The Scotsman quoted the bank as saying: This is very much short-term and is due to the pricing volatility of the market. We do not want to overpay for funding.
According to The Times, the Jersey-based fund is the largest bank conduit in the world, with approximately 57% of HBOS’s GBP33 billion stock market value.
