Bradford & Bingley launches £300m emergency rights issue

by Gill Montia

Story link: Bradford & Bingley launches £300m emergency rights issue

Bradford & Bingley (B&B) has turned to its shareholders to shore-up its balance sheet, in a £300 million emergency rights issue.

Around four weeks ago, the buy-to-let lender denied rumours that it was in financial difficulties, stating that the bank had a £2 billion funding facility that it has not yet used.

However, B&B now says that the proceeds of the rights issue are needed to strengthen the group’s capital position and reduce the impact of reductions in the value of some of its treasury investments.

According to Steven Crawshaw, B&B’s chief executive, the lender held off announcing the move until the environment was sufficiently stable for its launch.

The rights issue is underwritten by Citigroup and UBS and will offer 16 shares for every 25 held. It will be discounted by around 48% on yesterday’s closing share price of 158.75p.

Historically, B&B has raised over 25% of its capital through the wholesale money markets, leaving it vulnerable in the credit crisis.

Last month, the lender said it now has substantial customer deposits, from which it funds over 50% of its lending.