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B&B FORCED TO CUT BACK ON CASH CALL

Kent says US investor TPG Capital will help develop the business

Tuesday June 3,2008

By Peter Cunliffe

BRADFORD & Bingley yesterday dramatically scaled backed its planned cash call on shareholders after admitting it feared a City boycott.

The troubled bank unveiled the new terms of its rights issue as it issued a profits warning that sent its shares plunging to a new all-time low, despite a £179million injection from US investor TPG Capital.

Executive chairman Rod Kent, who took charge after Steven Crawshaw resigned on Sunday because of ill-health, admitted there had been a danger of the original rights issue being left “under water”, forcing the bank’s underwriters to mop up unwanted stock.

* CONFUSED ABOUT THE BANK'S PROFIT WARNING? THEN READ EXPRESS.CO.UK'S GUIDE TO THE B&B CRISIS NOW *

“We figured it was sailing pretty close to the floor, but we didn’t want an underwater rights issue. That wouldn’t be good for our retail shareholders,” he added.

The planned rights issue has been reduced from £300million to £258million, with shareholders offered 19 new shares for every 25 they hold at 55p. That compares with 16 for 25 at 82p under the previous terms.

Blaming a sudden downturn in the mortgage market for the profits warning, Kent insisted: “This is not a story like Northern Rock, of liquidity and funding problems. This is about profits performance, not funding.”

Fewer than three weeks after its last update, when it sparked fury by announcing the cash call after previously denying the need for such a move, the country’s biggest buy-to-let lender said it had been hit by a sharp increase in arrears, from £23million to £36million.

In the first four months of the year, it fell £8million into the red, against £107million profits a year earlier.

After paying £37million in City fees, B&B will raise £400million, including TPG’s £179million in return for a 23 per cent stake. “We’ve got a world-class strategic investor, with an awesome track record. They will really help us develop the business,” added Kent.

B&B shares plunged as much as 30 per cent, sending shockwaves through the rest of the sector. Floated at 257p in 2000, they closed 24 per cent lower, down 21bp to a new all-time low of 67p, valuing the company at £410million.