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Bradford & Bingley’s largest shareholders were forced to rescue the bank's capital-raising effort last night as TPG Capital, the private equity group, pulled out of a £179 million deal.
TPG had agreed to take a 23 per cent stake in the lender but, after learning of an expected downgrade of B&B’s rating by the ratings agency Moody’s, the fund’s managers are thought to have walked away.
However, the bank is believed to have set in motion a contingency plan that it had discussed with the Financial Services Authority, under which some of B&B’s shareholders would put up the £179 million. The rest of the £400 million required is to come from shareholders in a rights issue.
The shareholders involved are thought to include some of those who supported last month’s failed attempt by Clive Cowdery, the insurance entrepreneur, to push through an alternative to the TPG offer.
Mr Cowdery’s investment group, Resolution, was refused access to B&B’s books by the bank’s board.
TPG’s apparent withdrawal was in reaction to expectations that Moody’s would cut the troubled lender’s rating today by one notch to Baa1, in the bank’s second downgrade since the fundraising was announced.
A rating of Baa1 would leave B&B with the lowest credit rating of any of the big British banks and could potentially make it more costly for it to raise funding in the financial markets.
Shareholders are due to vote on B&B’s rights issue on Monday. They have been infuriated by the potential sale to a private equity firm, which investors believe contravenes their pre-emption rights. But they are expected to vote the capital-raising through because there is a dearth of alternatives for propping up the lender.
TPG had plans to hold on to a share of B&B for five years and to add to the company by acquiring other small lenders.
UBS and Citigroup, the rights issue’s underwriters, are expected to support the company through a downgrade. The investment banks have already been criticised for threatening to halt their underwriting once, when B&B incurred worse-than-expected mortgage arrears.
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As a small shareholder with an interest in B&B succeeding I am bemused why I havent been asked to support my own investment. It may not make business sense but the little guys could cough up if a good deal was offered and it wouldnt have to be the give away the big boys ask for.
Chris Sullivan, Chelford, UK
If Rod Kent is soon looking for work (and by Jove he should be!), he may perhaps be persuaded to assist my wife and I with our 'credit-crunched' household budgets. Precisely which cardboard box is best to keep out the cold, for example? And can it be snugly insulated with waste B&B paperwork?
Colin Johns, London, UK
The chairman and directors should resign with immediate effect as they are obviously not fit to run B & B.
Douglas W Tott, Bruichladdich, Scotland
good riddance to TPG. I have every confidence in the B&B management and I continue to put my money (both savings receiving good interest and buying shares) where my mouth is. O ye of little faith will see I am well rewarded. Lets all pull together and help genuine buyers get a home.
tony, loughton, essex
As a B+B shareholder I would rather my holdings value fall to zero than there be a government rescue package. Why? It will guarantee the red bracered losers on the board their bonus/golden handshake/pension. Let the free market function. Shareholders who disagree should have bought National Savings.
Eric Skelton, Cardiff, Wales
What a continued mess!.
Mr Darling had better step in NOW, before B&B have completely flushed the company down the tubes.
David Diggins, Derby., England.
I have an e-mail from B & B (not bed and breakfast) assuring me that the banks' future is safe as is my Bond that I hold but that document may not be enough to save my little pot of gold!
Derek Clifton, Andover, Hampshire, England
B+B ? BB+ surely ? Maybe not as good as that...?
charles murchison, Hampton Hill, Middlesex,
The Board refused to open B&B's books to Cowdery - one City type on Radio5 this sunny morn said that 'the City Boys' were wondering what they possibly 'had to hide' - Kent (no typo) & Co. now have their funding...from the same investors...without any due diligence taking place !! Clever stuff !
Alistair Fraser, London, England
Having worked in the arreas collection department of B&B, i can confirm that the whole company from top to bottom is infested with incompetent senior management, who are inacapable of preforming even the most basic functions of management. A new management team is required urgently.
Abid Mahmood, Birmingham, UK
I've known for 5 years that Buy to Let was a disaster waiting to happen. £600 rent on a flat with a mortgage of £800 makes no sense - especially at historically low interest rates.
But they believed what they wanted to believe - that property will always go up and up and up and up. Fools.
Mary Jones, Brightlingsea,
NOW may we have a Vote of Censure on the Executive and Board?
Noel Falconer MEcon, COUIZA, France
Just £179 million deal, to save a bank, how bad must their finances be?
If TPG Capital were not prepared to invest such a small sum, then questions have to be asked.
I would not touch their shares with a barge pole!
Not long to go, I think
Andrew Huddleston, Melton Mowbray, England
And they sit in their yachts in the Med while savers run the risk of inflation robbing them or worse still the total collapse of our economy and total loss of savings.
And our gutless corporate banking controlled does??????
NOTHING!!!
R McAuley, Antrim, United Kingdom
Now will the Police arrest the Kent Gang of Montebancs. They have wrecked the lives of hundreds of thousand of shareholders who believed their lies. We should be able to seize their assets and scrapped all the lucrative payoff packages they gave themselves. Seize the pension of the heart man also
john fulham, liverpool, England
A ratings 'downgrade'? B&B should be sealed in concrete and dropped into the Mariana Trench. At least the water pressure down there would save us more vapourings from a crew that knows its vessel is well and truly sunk. Abandon ship all ye who enter here.
Colin Johns, London, UK
Nice to know UBS and Citi will support B+B. The biggest loser in Europe and one of thebiggest in America. Gives one real confidence doesn't it?
eric campbell, harrogate, uk