The Wall Street Journal-20080130-Credit Crunch- Alliance - Leicester Secures Funding Despite Write-Down

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Credit Crunch: Alliance & Leicester Secures Funding Despite Write-Down

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LONDON -- U.K. mortgage lender Alliance & Leicester PLC said yesterday that it secured funding to see it through this year, despite a bigger-than-expected write-down in 2007 related to the credit crunch.

Alliance & Leicester, which many feared would be hurt badly by the tightening of credit markets over the past six months, said the write- down would total GBP 185 million ($367 million) in 2007 -- more than three times the GBP 55 million it had estimated in November.

Taking the write-down into account, operating profit for 2007 will be down from 2006 levels, Alliance & Leicester said. The bank is due to publish its 2007 results on Feb. 20, when it also plans to give its financial outlook for 2008.

Alliance & Leicester said it had obtained funding to cover its needs to the end of this year, putting it in a more secure position than previously, when it said it had funding through the third quarter. The stock closed down 25 pence, or 3.5%, at 700 pence yesterday. The stock is up about 8% so far this year, having risen 16% on Jan. 2 after it emerged that it had been in takeover talks with Spanish bank Banco Santander SA in December. Still, the shares are down about 30% from their average closing price in August, when the credit-market squeeze started.

"We continue to reduce our reliance on the short-term money markets for wholesale funding, and are also making good progress in lengthening the average maturity of our wholesale funds," the bank said in a statement.

Dresdner Kleinwort analyst James Invine downgraded Alliance & Leicester to "sell" from "hold," saying its "shares have been boosted by bid speculation, which we do not believe will be fulfilled for the time being."

The bank also said Chief Executive David Bennett is taking a leave of absence due to illness and will be temporarily succeeded by Chris Rhodes, the chief financial officer.

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Ishaq Siddiqi contributed to this article.