B&B faces fee despite failed deal

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Date: Monday 07 Jul 2008

LONDON (ShareCast) - Bradford & Bingley will have to pay fees to Goldman Sachs, which gave the bank advice on an investment from a US private equity group, even though the deal fell through.

The mortgage lender is to cough up a basic "success fee" plus an additional amount on the completion of a new funding package, according to the Sunday Telegraph.

TPG Capital had agreed to take a 23% stake in the lender worth £179m, but is thought to have changed its mind after learning of an expected ratings downgrade by Moody’s.

Several of B&B’s large institutional shareholders have been forced to step in and rescue its £400m fundraising after US private equity group Texas Pacific (TPG) walked away.

The company’s share price plunged to a new low today and beneath the rights issue price of 55p. Experts fear the fall will deter shareholders from stumping up fresh cash.

Last month’s stubborn rejection of overtures from Resolution forced insurance entrepreneur Clive Cowdery’s bid vehicle to scrap plans to invest £400m in the business.

Resolution and the bank's four biggest investors, Standard Life, Legal & General Investment Management, M&G and Insight, had wanted to kill B&B’s existing fundraising plans.

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