Bradford & Bingley turns to US bank for £179m

Monday, 02 June 2008 12:00

American investor Texas Pacific Group (TPG) is to purchase 23 per cent of Bradford & Bingley, as profits for the bank almost halved.

The bank - which is the eighth biggest in the UK and a major buy-to-let lender - has been hard hit by the global liquidity crisis and will see around £179 million of investment from the deal.

The news follows a decision by the lender to restructure the £300 million it requested from existing investors in a rights issue on May 14th, which it had denied it would do in April.

As a result of the new deal with TGP the rights issue will be scaled back to £250 million, with all shares issued at an offer price of 55 pence per share.

Bradford & Bingley's share price fell to 74.00p - down 14.25p - at 14:04 to a record low. This values the bank at £546 million, well below the £3.3 billion the company achieved at its March 2006 peak.

Other banking stocks also fell today - as mortgage approvals hit a record low - with HBOS down ten per cent and Alliance & Leicester slipping 4.8 per cent.

Bradford & Bingley parted ways with chief executive Steven Crawshaw on Sunday, citing a "serious illness" on the part of former chief.

Chairman Rod Kent has become executive chairman in his place.

"The last few weeks have been challenging for Bradford & Bingley, and this is a disappointing trading update reflecting a more difficult market environment," said Mr Kent, the new executive chairman.

"I understand shareholders' disappointment. Nevertheless, I am delighted to welcome TPG as a major strategic investor in Bradford & Bingley.

"With a strengthened capital base and the skills that TPG will bring I am sure we can develop the business to exploit the opportunities available in our markets in the medium term."

Bradford and Bingley also announced today the first four months of 2008 the impact of lower interest income and increased credit impairment charges has resulted in the company slipping into the red.

The company made a £8 million pre-tax loss in the first four months of 2008, compared to a profit of £108 million for the four months to April 30th 2007.

Commenting on the tie-up Matthias Calice, a partner at TPG, said: "Bradford & Bingley has a longstanding established franchise in the UK specialist lending market.

"We believe that the company's superior market position, coupled with this injection of capital provides the platform for potential growth and profitability.

"We are very supportive of Rod Kent's appointment as executive chairman and look forward to working with him and his team to support the Company's growth strategy."

Chris O'Toole

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