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Bradford & Bingley in rights issue farce
Bradford & Bingley plans to increase its rights issue to £400 million after U.S. private equity firm TPG Capital pulled out of a plan to buy a stake, the bank said.
TPG pulled out after ratings agency Moody's cut B&B's debt ratings, triggering a clause allowing TPG to terminate the agreement, B&B said in a statement on Friday.
B&B had planned to sell TPG a 23% stake for £179 million and raise £258 million through a rights issue. It said it would now seek to raise a net £400 million through the rights issue.
The subscription price will remain at 55 pence per share. The shares, which closed on Thursday at 61p, have tumbled 77% this year. Traders said they were set to open as much as 10% lower today.
B&B said several of its biggest shareholders, including Standard Life, Prudential's M&G, Legal & General and HBOS's Insight were supporting the enlarged rights issue.
Citi and UBS will still underwrite the rights issue, the bank said.
A credit trader said the new plan was good for B&B. "TPG pulled out, having pulled a fast one in securing a huge discount, but now Bradford is going to get a stronger investor base," the trader said.
The bank is in need of cash after a slump in the housing market. But B&B's emergency fundraising plans have been in turmoil, prompting criticism of Executive Chairman Rod Kent's handling of the crisis.
The lender was forced to slash the price of a rights issue and bring in TPG as an outside investor a month ago after issuing a stark warning on the state of the mortgage market, saying borrowers were defaulting on loans faster than expected.
Entrepreneur Clive Cowdery tried to gatecrash the TPG deal with his own plan to inject £400 million into B&B, but walked away last week, saying the lender's refusal to open its books made a deal impossible.
Cowdery had said he was backed by investors representing over a quarter of B&B's shares, including the four who are now supporting the enlarged rights issue.
It had proposed to buy B&B shares at 72p each and would allow all shareholders to invest on the same terms.
Moody's said it cut the long-term bank deposit rating and the senior debt rating of B&B to Baa1 from A3 to reflect "the substantial deterioration in the bank's asset quality so far in 2008 as well as the expectation that this will weaken further during the rest of the year".
TPG pulled out after ratings agency Moody's cut B&B's debt ratings, triggering a clause allowing TPG to terminate the agreement, B&B said in a statement on Friday.
B&B had planned to sell TPG a 23% stake for £179 million and raise £258 million through a rights issue. It said it would now seek to raise a net £400 million through the rights issue.
The subscription price will remain at 55 pence per share. The shares, which closed on Thursday at 61p, have tumbled 77% this year. Traders said they were set to open as much as 10% lower today.
B&B said several of its biggest shareholders, including Standard Life, Prudential's M&G, Legal & General and HBOS's Insight were supporting the enlarged rights issue.
Citi and UBS will still underwrite the rights issue, the bank said.
A credit trader said the new plan was good for B&B. "TPG pulled out, having pulled a fast one in securing a huge discount, but now Bradford is going to get a stronger investor base," the trader said.
The bank is in need of cash after a slump in the housing market. But B&B's emergency fundraising plans have been in turmoil, prompting criticism of Executive Chairman Rod Kent's handling of the crisis.
The lender was forced to slash the price of a rights issue and bring in TPG as an outside investor a month ago after issuing a stark warning on the state of the mortgage market, saying borrowers were defaulting on loans faster than expected.
Entrepreneur Clive Cowdery tried to gatecrash the TPG deal with his own plan to inject £400 million into B&B, but walked away last week, saying the lender's refusal to open its books made a deal impossible.
Cowdery had said he was backed by investors representing over a quarter of B&B's shares, including the four who are now supporting the enlarged rights issue.
It had proposed to buy B&B shares at 72p each and would allow all shareholders to invest on the same terms.
Moody's said it cut the long-term bank deposit rating and the senior debt rating of B&B to Baa1 from A3 to reflect "the substantial deterioration in the bank's asset quality so far in 2008 as well as the expectation that this will weaken further during the rest of the year".
Fri, 4th Jul 2008