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Monday 01st of December 2008
September 24, 2008

B&B heavily downgraded by credit ratings agencies


by Kay Murchie
”B&B

Credit ratings agencies have added to Bradford & Bingley’s (B&B) woes after the lender has been downgraded by Fitch Ratings from BBB+ status to BBB-, only one notch above ‘speculative grade‘, or informally known as ‘junk’.

Meanwhile, Standard & Poor’s downgraded the lender from A-2 to A-3.

Earlier this week, there were reports that the Financial Services Authority (FSA) had been holding talks with potential buyers for B&B.

A Sunday newspaper suggested that Spanish bank Santander, which owns Abbey, had been approached by the FSA with regard to a takeover of B&B. Santander recently bought Alliance & Leicester.

The Sunday Telegraph also said the FSA has contacted Dutch banking group ING and National Australia Bank, owner of Yorkshire and Clydesdale banks.

Banking analysts have suggested that the uncertainty surrounding B&B may result in customers withdrawing funds out of the bank.

Following the downgrade of its status, B&B saw it shares close at a record low yesterday of 24p. Its shares have suffered heavily this year, particularly due to two attempts at fundraising failed and has suffered due to the property market slowdown.

However, shares recovered slightly this morning on the news that the lender has escaped from an obligation to buy £1 billion of unwanted mortgage assets next year. Furthermore, a contract under which B&B had to buy a further £1.75 billion of mortgages from General Motors’ finance unit, GMAC-RFC, by the end of next year has been renegotiated.

B&B, which is UK’s largest buy-to-let lender, continues to defend its position and insists that its funding is solid and it remains well-capitalised.

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