B&B in fresh plunge

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By Lee Wild

Date: Tuesday 08 Jul 2008

LONDON (ShareCast) - Troubled mortgage lender Bradford & Bingley watched its shares slump over a quarter Tuesday to yet another all-time low and more than 40% less than its rights issue price.

The banks and institutional investors underwriting the £400m cash call are staring at chunky losses unless the shares recover, with the price touching 31p at one stage today.

Worries about B&B’s future and the ability of its bosses coupled with the recent raft of negative broker comment have spooked a lot of investors.

The stock’s decline accelerated Friday after Moody’s downgraded its long-term credit rating to Baa1 from A3 due to a “substantial deterioration in the bank's asset quality”.

It is thought that scared away US private equity group TPG Capital, which had agreed to take a 23% stake in the lender worth £179m.

The TPG deal had formed part of a plan that involved a reduction in the original £400m rights issue to £258m and a drop in the issue price to 55p from 82p previously.

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

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

It has also emerged that B&B will have to pay a £55m bill to advisors including Goldman Sachs, even though the deal fell through.

The shares have since lifted off their worst levels to around 35p on hopes that Skipton Building Society may launch a bid for the £216m company.

In an interview with Financial World magazine some 10 days ago, Skipton boss John Goodfellow said he had considered bidding for B&B, but TPG got there first.

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