Bosses accused of ‘bungling’

8:40am Saturday 5th July 2008

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Bradford & Bingley’s bosses have been accused of “bungling” a vital £400 million fundraising deal after being forced into yet another overhaul of their plans.

The lender said its major investors were stepping in to back a new deal after a US private equity firm dramatically withdrew a £179 million cash injection.

It is the second time directors have had to alter their fundraising plans since May.

B&B shares dropped 18 per cent during trading yesterday. Collins Stewart banking analyst Alex Potter said: “Management have bungled here.”

Texas Pacific Group (TPG) had been lined up to buy 23 per cent of the company, with another £258 million coming from a rights issue, but TPG walked away after B&B was flagged up as a greater investment risk by ratings agency Moody’s.

B&B said a group of its largest shareholders including M&G Investment Managers, Legal & General Investment Management, Insight Investment and Standard Life Investments were now backing an enlarged £400 million cash call.

B&B’s executive chairman Rod Kent said: “While we are disappointed that TPG intends to terminate its subscription agreement, I am pleased that Citi and UBS and our major shareholders continue to support our proposed capital issuance.

“Bradford & Bingley continues to be well-funded and the capital raising will reinforce our position as one of the better capitalised banks and one of the leading mortgage and savings banks in the UK.”

The Association of British Insurers (ABI) branded it “unacceptable” because it removed the right of pre-emption for shareholders – in which new shares should be offered to existing shareholders in proportion to their existing holdings.

And the UK Shareholders Association (UKSA) also urged smaller shareholders – which hold around 35 per cent of the group’s stock – to vote down the plans.

The lender first announced in May a £300 million rights issue to help shore up its balance sheet, after earlier denying the need for the extra cash.

Then last month B&B announced it was bringing TPG on board, and reducing the size of the rights issue to £258 million.

A rival funding bid led by investment group Resolution, involving the injection of £400 million by a series of major investors, was rebuffed by B&B last week.

B&B’s share price closed yesterday at 50p.