B&B rescue plan under pressure as shares fall to all-time low
Bradford & Bingley (B&B) saw its shares plunge to an all-time low of 42p today, well below the bank’s rights issue price of 55p, heightening fears about its fund-raising plans.
This is just another blow to the lender after credit agency, Moody’s, cut its rating from A3 to Baa1, which resulted in US private equity firm Texas Pacific Group (TPG) withdrawing from a deal to inject £179 million into B&B in exchange for a 23% stake.
Furthermore B&B, which is one of the UK’s largest buy-to-let lenders, will still have to pay a substantial ‘success fee’ to Goldman Sachs for advice on its failed US funding deal, according to a report in The Sunday Telegraph.
Commenting on recent events at B&B, analysts at Fox-Pitt, Kelton called the developments ‘unequivocal negatives‘.
B&B has suffered of late due to the property market slowdown. Furthermore, it said that the number of borrowers who were over three months in arrears with their mortgage payments had risen from 1.63% to 2.16% during the last 4 months.
The fall in the shares today raises fears that retail shareholders will snub the bank’s rights issue, which is crucial to supporting B&B’s balance sheet.
Furthermore, the falling stock means that there is little incentive for smaller investors, many of whom received their shares in a de-mutualisation, to subscribe.
The lender’s third efforts at raising capital is being underwritten by investment banks Citigroup and UBS.
Last weekend, financier, Clive Cowdery who runs Resolution investment group, also walked away from a deal with B&B after he planned to pump £400 million into the troubled UK lender.
Mr Cowdery accused B&B of obstructing all his efforts to put his plans forward and said the entrenched position of the board of B&B has prevented the constructive engagement necessary to finalise this proposal.
B&B is to hold an extraordinary meeting on July 17 to gain approval for its revised fundraising plans.