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B&B DIVES DESPITE RIGHTS ISSUE RESCUE

Shares in B&B took a tumble yesterday

Saturday July 5,2008

By Peter Cunliffe

BRADFORD & Bingley shares tumbled yesterday after it rushed out a new emergency fundraising package following the departure of a US backer.

Shareholders were left stunned as private equity firm TPG walked away from the planned £400million refinancing in what critics condemned as the latest in a series of bungles by the mortgage bank.

The shares fell 11p to 50p on renewed worries about the outlook for the bank despite the latest deal.

After the intervention late on Thursday of the Financial Services Authority — anxious to avoid a fresh crisis in the banking sector — Legal & General, Standard Life, M&G Investments and HBOS’s Insight investment arm said they would support a new £400million scheme.

A downgrading of B&B by credit rating agency Moody’s prompted TPG to trigger a clause allowing it to walk away from its deal to pay £179million for a 23 per cent stake alongside a £258million rights issue. The Americans reckoned their plans no longer stacked up because the downgrade raised the cost of borrowing for B&B.

With the FSA keen to push through a deal before the stock market opened yesterday, the rights issue was expanded to £400million at an unchanged price of 55p per share.

Investment banks Citi and UBS will underwrite the whole issue.

B&B’s beleaguered chairman Rod Kent insisted the company was well funded and the rights issue would reinforce its
position as one of the better capitalised banks in the UK. B&B said it was business as usual at its branches.

Investors were shocked by the severity of the Moody’s downgrade in which it said there had been a “substantial deterioration” in the quality of the bank’s assets, with more to come.

Broker Collins Stewart called it startling but added: “We categorically do not believe there is a material risk of depositors losing money. This is not Northern Rock.”

Clive Cowdery’s investment firm Resolution, whose alternative rescue plans were rejected by Kent last month, signalled it was unlikely to make a renewed approach.

Monday’s planned special shareholders’ meeting in Harrogate has been cancelled and will be rescheduled for the week of July 14.

A supplementary prospectus will be sent to investors.