The price of Bradford & Bingley's perpetual subordinated bonds (PSBs) has been discounting such an event for months, but it's still a shock when it happens. The government-owned lender has said it will not make the July payment on £50m worth of 11.25 per cent PSBs.
Interest on this instrument is cumulative, so it's possible that investors will get at least some of their money eventually. The lending business of the former mutual - the savings part was sold to Spain's Santander - is in wind-down mode. Its £40bn mortgage book will be progressively run-off, and once that process is complete, it is the company's intention to start repaying creditors.
But that could take years, and until then, it would seem likely that future interest payments will also be missed. The PSBs pay out twice-yearly, in January and July. The January 2009 payment was made.