Tug of war over Bradford & Bingley rights issue causes shares to recover

25 June 2008 / by Rebecca Sargent
Bradford & Bingley has received a helping hand at the last minute following a proposed rights issue alternative from Resolution, an investment company owned by insurance expert Clive Cowdery.

The buy-to-let mortgage specialist has reportedly been offered a potentially better rights issue deal than its pending agreement with Texas Pacific Group (TPG). According to experts, Mr Cowdery, a former insurance entrepreneur, intends to turn his hand to banking, and Bradford & Bingley is first on his hit list.

As the lenders' rights issue currently stands, TPG will buy a 23 per cent stake in the bank at 55p a share and a total of £179million, with a further £258million expected to come from existing shareholders.

However, the TPG deal sparked outrage amongst shareholders who felt their rights of being given first refusal had been violated. Additionally, Cowdery is reportedly offering 72p per share, an increase of 17p from the TPG offer. Consequently, experts are predicting that existing shareholders are more likely to back the Resolution rights issue over TPG's proposal.

As the news circulates in the banking sector, shares in Bradford & Bingley have increased by more than 10p each to 79p, making the TPG rights issue look shaky as it offers much less than the bank is currently worth.

According to reports, the proposed rights issue from Resolution is backed by at least four major shareholders, including Standard Life, Legal and General, Prudential and Insight, which are willing to underwrite the deal after offering other existing shareholders the chance to buy in.

Mr Cowdery faces a race against time, however, as Bradford & Bingley will hold its extraordinary general meeting on July 7, offering shareholders the chance to back the TPG rights issue already on the table.

Meanwhile, Barclays has become the latest in a string of high street lenders to launch a rights issue in attempts to boost its balance sheet and strengthen its position in the market. The bank has reportedly said it is planning to raise £4.5billion from new investors such as the Qatar Investment Authority.

©Fair Investment Company Ltd