Bradford & Bingley rights issue snubbed by shareholders
Bradford & Bingley revealed the full extent of its downfall as one of Britain’s biggest backers of the buy-to-let property boom, as only a small number of investors backed a do-or-die refinancing package.
Bradford & Bingley, the UK’s largest buy-to-let mortgage lenders, said that it bankers were left with more than 70% of a £400m rights issue, which shows the widespread reluctance among shareholders to back the cash call.
The mortgage lender said 27.8% of investors took up their rights at 55p a share, which left the remaining £300m of shares with underwriters Citigroup and UBS.
Analyst said the failure to take up shares was the result of concerns that the decline in property prices would continue into next year and possibly beyond. According to some research, Buy-to-let market is especially vulnerable as landlords face double pressure of declining values and a lending freeze as a result of the credit crunch.
Fears about the property market have affected all of the mortgage banks in the UK. HBOS was humiliated this month when only 8% of its investors backed a £4bn rights issue.
Worries over the future of the buy-to-let market have dented confidence in Bradford & Bingley.
To improve confidence in Bradford & Bingley, they have confirmed that experienced City banker Richard Pym would become chief executive. He is set to receive a £3m pay package.
Mr Pym, formerly of Alliance & Leicester is seen as a safe pair of hands to guide Bradford & Bingley through a difficult period.
Analyst at Collins Stewart, Alex Potter said “Pym is a safe pair of hands in our view to try to shepherd B&B through the coming asset quality problems we feel it will suffer, however we also feel he can do little to avert said problems”.
See www.bradford-bingley.co.uk for more information on the mortgage lender.
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