Bradford & Bingley rights issue changes tack…again

04 July 2008 / by Rebecca Sargent
Bradford & Bingley has been forced to restructure its rights issue for the third time in as many months, as its latest investor backs out on the news that the bank's credit rating has been downgraded by ratings agency Moody's.

The buy-to-let mortgage specialist has been at the centre of much controversy in recent weeks. The drama began as the lender snubbed a traditional rights issue in favour of an agreement with Texas Pacific Group (TPG) whereby it would acquire a 23 per cent stake in B&B at a cut price of just 55p per share. However, existing shareholders were outraged by this as it disregarded their right to first refusal of shares.

To add to the hoo-hah Bradford & Bingley just last week received an alternative offer from investment company Resolution, offering 72p per share for a smaller stake in the company – an offer that was seen as the favourite by larger B&B shareholders.

However, Bradford & Bingley bosses point-blank refused to give Resolution the information it needed in order to make a serious offer, and forced the company to back down, much to the annoyance of B&B's largest shareholders.

So, despite a superior offer, Bradford & Bingley decided to stick with its TPG offer, an offer that was last night terminated on the basis of the lenders' credit rating on unsecured long term debt being reduced by ratings agency Moody's.

However, Bradford & Bingley was quick to announce that it will still be proceeding with capital raising by way of an enlarged rights issue of around £400million. The latest version of its cash call is supported by a number of its largest shareholders, including Investment Managers, Legal & General Investment Management, Insight Investment and Standard Life Investments, it will also remain underwritten by Citi and UBS.

Executive chairman at Bradford & Bingley, Rod Kent commented: "Whilst we are disappointed that TPG intends to terminate its Subscription Agreement, I am pleased that Citi and UBS and our major shareholders continue to support our proposed capital issuance.

"Bradford & Bingley continues to be well-funded and the capital raising will reinforce our position as one of the better capitalised banks and one of the leading mortgage and savings banks in the UK," he concluded.

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