Bankers for Bradford & Bingley have been left to sell over 70 percent of its 400 million pound cash call, the UK lender said, as it hired the former head of rival Alliance & Leicester to draw a line under its troubles. The mortgage bank, which has seen a torrid three months since it first surprised the market with news of an emergency rights issue, named City veteran Richard Pym as chief executive with immediate effect.
Pym replaces Steven Crawshaw, who quit in June for health reasons as B&B struggled to push through the funding boost. The embattled bank, forced to turn to investors for cash in the face of a fast-deteriorating UK economy, said on Monday investors took up only 27.8 percent of its fundraising.
Underwriters Citi and UBS now have until Friday to place the remainder of the cut-price, twice-restructured offering. The outcome of the rights issue - latest in a string of capital injections for banks battered by the credit crunch and the broader macroeconomic slowdown - is well below historical take-up levels for rights issues but is in line with analysts' expectations and above a paltry 8 percent seen at rival HBOS.
B&B traded close to the rights price of 55p in the run-up to the call, and just above as subscriptions closed on Friday. Most of B&B's retail shareholders, who made up around 40 percent of the investor base before the rights issue, are not expected to have participated, but four top shareholders - Standard Life, Legal & General, Prudential's M&G and HBOS's Insight - are understood to have taken up their roughly 13 percent share of the fundraising.
The four agreed to support Citi and UBS after a deal with US private equity firm TPG fell through last month after a rating downgrade, forcing B&B to again overhaul its cash call. They had been expected to take up as much as 145 million pounds of shares to back the underwriters, in a deal also supported by six of Britain's largest lenders - spreading the cost of propping up B&B over 12 major institutions.
"We're all very big players. It's not a big concern to us," one source familiar with the matter said on Monday. "The rights issue doesn't settle until the end of the week, so we have five days to place the rump. We'll see how much demand there is and then determine what we'll do." The six retail banks have agreed to take on up to half the rights issue or as much as 3 percent each of B&B. That number should come down, however, after take-up was stronger than expected at the time of the deal and with shares currently trading close to 55p, well above recent lows. At 0945 GMT, the shares were trading flat at 54.75p.
If they took up their maximum, HSBC, Lloyds TSB, HBOS, Barclays, Santander's Abbey and Royal Bank of Scotland would be left with just under 20 percent of B&B's enlarged share base. B&B has seen a turbulent few months, with its shares losing over three quarters of their value since January. But the bank and its investors hope Pym's appointment will spark a turnaround.