Bradford & Bingley underwriters left holding stock

| August 25, 2008 | 0 Comments
”Bradford

Troubled buy-to-let lender, Bradford & Bingley (B&B), confirmed last week that 27.8% of its new shares, which were on offer at 55p each, have been taken up by investors.

This left underwriters, Citigroup and UBS, to place the remaining 597 million new shares, worth £328.3 million, by last Friday.

However, the underwriters were left holding 71.16% following the cash call.

As the stock was trading below the 55p at which the new shares were issued, Citigroup and UBS informed B&B over the weekend that they had failed to find any buyers.

Consequently, their sub-underwriters, Abbey, Barclays, HBOS, HSBC, Lloyds TSB and RBS must keep the shares for a minimum of 20 days. The six high street banks were asked to form a rescue plan by the Financial Services Authority.

Last week, B&B announced that former Alliance & Leicester boss, Richard Pym, has become chief executive with immediate effect, after Steven Crawshaw stepped down in June for health reasons.

B&B has had a difficult few months after news of the £400 million rights issue emerged. The mortgage lender has suffered due to the property market slowdown. However, it hopes that Mr Pym’s appointment will signify the end of a difficult period.

Shares in the lender have suffered lately and have traded near record lows after two previous attempts at fundraising collapsed.

Last month, US private equity firm Texas Pacific Group (TPG) pulled out of a deal, after credit rating agency, Moody’s, downgraded the lender’s debt. TPG had planned to inject £179 million into B&B in exchange for a 23% stake.

In addition, financier Clive Cowdery who runs Resolution investment group, walked away from a deal with B&B after he planned to pump £400 million into the troubled UK lender.

B&B, among other UK banks including HBOS, Royal Bank of Scotland and Barclays, have all sought to raise extra cash after being hit by the credit crunch.

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