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Bradford & Bingley gets the go ahead HBOS looks set to lose

17 July 2008 / by Rebecca Sargent
Bradford & Bingley's fate has finally been decided today as shareholders chose to support the sinking ship and give the go ahead to the proposed rights issue, despite its share price potentially causing them a loss.

The £400million cash call from Bradford & Bingley has been at the centre of much speculation over the past few weeks, as it reconfigured the deal three times due to a dwindling buy-to-let mortgage market and share price.

The lender's fate was decided today at its extraordinary general meeting (EGM) where existing investors voted in favour of the enlarged rights issue. The share sale will begin on August 8, with a completion deadline of August 26.

Executive chairman at B&B, Rod Kent said: "We're pleased that our shareholders have voted in favour of the enlarged rights issue today, the proceeds of which will strengthen our capital base, ensuring we remain one of the better capitalised banks in the UK."

However, experts are already speculating as to the likelihood of shareholders actually taking up their rights. The Bradford & Bingley share price currently stands at 51p, 4p less than the 55p rights issue price which was intended to be a discounted price. However, as the lender continuously moved the goal posts of its rights issue, confidence in it has fallen, dragging the share price with it.

Nevertheless, if the worst comes to the worst, the rights issue is fully underwritten. Citi and UBS are set to take the main brunt with sub-underwriters for back up in the form of the UK's six leading banks.

Meanwhile, HBOS's £4billion rights issue is due to close tomorrow amid fears that as much as half of the issue may have been sold to its underwriters, Morgan Stanley and Dresdner Kleinwort potentially leaving them with £1billion worth of rights issue shares each and a paper loss of £75million each due to falling shares.

Shares in HBOS, one of the UK's leading lenders, have fallen ever since it first announced a rights issue back in April. However, it is thought that HBOS could now be in a similar boat to Bradford & Bingley as its shares have fallen below the rights issue price of 275p to just over 266p.

© Fair Investment Company Ltd