WEST Bromwich Building Society has avoided collapse by convincing creditors to swap the money they lent it into equity-style holdings, enabling it to boost its depleted capital levels. <br /><br />The mutual asked creditors to let it swap £182.5m of subordinated debt into “a new instrument, which will qualify as tier one capital”. <br /><br />If the debt swap had failed to win creditor backing, profitable parts of the company – which saw its debt downgraded by ratings agencies Moody’s and Fitch in the last two months – would probably have been bought by a better-capitalised rival like the Coventry Building Society.<br /><br />But regulators and the government were desperate to avoid this, as it would have made taxpayer support for the remaining loss-making division inevitable. <br /><br />The group will unveil annual results on Monday to show the impact that loan writedowns are having on its commercial property and buy-to-let loan books. <br /><br />The last minute deal was announced as the sector welcomed news of a forthcoming Treasury White Paper, which will legislate for a new kind of financial instrument to allow building societies to raise tier-one capital on markets without having to become listed companies like banks.<br /><br />Chelsea Building Society, another mutual which has had its debts downgraded during the credit crunch due to concern about its stability, said it would consider using the instruments to boost its tier one capital. A spokesman said: “Normal business needs to resume for building societies to allow house prices to stabilise.”<br /><br />Nationwide, the UK’s biggest building society, said it was “certainly looking forward to the contents of the white paper”. “Anything that puts us on a more level playing field with the banks would be welcome,” a spokeswoman said.