B&B rights issue at risk after shares plummet

Buy-to-let specialist, Bradford & Bingley (B&B), saw it shares dive 16% yesterday which has caused concern over its £300 million rights issue.

It is the latest UK bank to ask its shareholders for additional funding to shore up its balance sheet.

Should the shares fall a further 20% between now and July 11, the deadline which investors will decide whether or not to pay the new cash, the rights issue would be under threat.

According to one analyst, the fall in B&B was an indication of the pressure on the bank’s management which a month ago had insisted that it was not preparing a rights issue.

So far this year, shares in B&B have fallen 56% to their lowest since flotation at 248p in December 2000.

Analysts believe that the markets were prepared for volatile trading in bank shares over the next few weeks as the flood of rights issues are completed and speculation increases that other lenders may also be forced to ask their shareholders for cash.

Other UK banks who have announced plans for rights issues include HBOS and RBS who are looking to raise £4 billion and £12 billion respectively.

B&B was founded as a building society over 150 years ago. It has recently cut back its mortgage lending, introduced tougher borrowing criteria and increased interest rates on high-risk mortgages.

Discuss this in the Finance Markets forums

Story link: B&B rights issue at risk after shares plummet