 Analysts are looking at the prospects for the whole UK banking industry |
Bradford & Bingley (B&B) shares fell to a record low as worries about its fund-raising plans intensified. Shares dropped as much as 18% to a new low of 33p, well below its rights issue price of 55p, then recovered slightly. B&B suffered a big sell-off on Friday when credit agency Moody's downgraded its debt, prompting Texas Pacific Group (TPG) to pull out of plans to invest. The shares were hit further by news that a possible buyer of B&B was unlikely to rekindle its interest. Investment company Resolution had been interested in taking control of B&B, but walked away after the firm was refused access to the lender's books. On Monday, B&B shares closed 16% lower at 42p. Unequivocal negatives Analysts said that B&B has been hit by a number of negative factors all at the same time.  |  We cannot rule out the possibility of an effective failure, with shareholders receiving little or nothing for their shares |
Analysts at Fox-Pitt, Kelton called recent developments "unequivocal negatives". B&B's recent problems were sparked on Friday by TPG's decision to back out of a plan to pay �179m for a 23% stake in the lender. The mortgage firm managed to salvage its plans to raise �400m after leading City institutions rallied round to provide the cash. B&B is offering investors its new stock at a price of 55p per share. A rights issue is when a company offers shares at a discount to existing investors, giving them the opportunity to increase their holdings and raise money for the company to use to shore up its balance sheet. Fox-Pitt, Kelton cut its target price for B&B shares to 43p on Monday on the assumption the rights issue was completed at the 55p subscription price and the Bank of England and Financial Services Authority ensured B&B did not "fail". "However, we cannot rule out the possibility of an effective failure, with shareholders receiving little or nothing for their shares," said analysts Fox, Pitt-Kelton. B&B will hold an extraordinary meeting on 17 July to gain approval for its revised fundraising plans.
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