Bradford Bingley Rights Fiasco

Bradford and Bingley Bailed Out by TGP

UK mortgage lender Bradford & Bingley said this morning buyout firm Texas Pacific Group is to buy a 23% stake in the bank as part of a re-capitalisation programme which will also see it cut the price of a previously-announced rights issue.

Bradford and Bingley is to get £179m from a deal with the Texas Pacific Group, and will get a further £258m by selling new shares to investors. The price for the shares will be somewhere between 50 and 55p, i.e. over 27p less than the original rights issue at 82p.

The bank's share price has fallen sharply since the rights issued was announced, destroying the original 48% discount.

Profits have fallen the first 4 months of 2008 to £56m compared with £108m last year, as a result of higher funding costs and increasing numbers of bad debts.

The bank blamed higher funding costs caused by the credit crunch, and an increase in bad debts as more borrowers have difficulty making their repayments.

Accounts in arrears rose to 2.16% compared with 1.63% at the end of December.

Numis Securities has said that its target price is ‘under review’.

Collins Stewart has reiterated its 'sell' recommendation and is also reviewing its target.

They also say that the statement indicates worsening conditions for revenues and asset quality.

Shares fell 30% at one stage this morning although some people see the intervention of TPG as a positive sign which could signal the bottom for the share price. At 55p the share price has fallen almost 90% since its peak two years ago.

It is also seen as a takeover target of course. But shareholders have no sympathy for Stephen Crawshaw who apparently is ill. None of the private investors on the bulletin boards can see any reason why he should be getting any bonus at all for driving the bank to the wall.

All banks have suffered as a result of this announcement by B&B although HSBC and Standard Chartered have suffered less than the others.

Given how much people hate banks in the UK there is little sympathy for any of their troubles, people are far more interested in learning how high the bonuses are going to be for the idiots who caused the current mess.