Bradford & Bingley shareholders approve fundraising

BRADFORD & Bingley shareholders today approved its latest fundraising scheme but the expected backlash against the beleaguered buy-to-let lender failed to materialise.

The bank received the go ahead with its third attempt at a balance sheet boost but under 60 investors gathered for the extraordinary general meeting at Sheffield Arena.

Chairman Rod Kent said following the meeting: “We’re pleased that our shareholders have voted in favour of the enlarged rights issue today, the proceeds of which will strengthen our capital base, ensuring we remain one of the better capitalised banks in the UK.”

Earlier he told the investors present: “If we keep our heads, we will get through it.”

The meeting to decide whether the £400m rights issue should go ahead comes as B&B’s battered shares remain below the 55p price being offered to investors under the scheme.

In his opening address, Mr Kent told the investors dotted around the cavernous hall that mortgage lending was a cyclical business which involved a two-year downturn every decade.

He said: “This is such a downturn. It will pass and if we keep our heads we will get through this.”

He told the 56 shareholders who had gathered in the 15,000 seat arena: “The process of raising capital has not been a smooth or an easy one for Bradford & Bingley.

“We completely understand that this has not been a comfortable process for our shareholders, our customers and our employees.”

Answering questions, he said he did not think executives would be getting any bonuses this year and confirmed his remuneration package did not include a bonus scheme.

A handful of shareholders took to the microphone to criticise the board. One, retired stockbroker Peter Hepworth, accused it of “not being totally up front with shareholders”.

Mr Hepworth, 54, from Doncaster, went on: “Why should we have faith in what you’ve got to say in the future?”

He went on: “I honestly think you have misjudged the majority of the shareholders.”

Shareholders have until 11am on August 13 to register for the additional shares under the placing, with the rights issue due to complete in the last week in August.

But take-up among B&B’s army of smaller private investors left from the bank’s demutualisation in 2000 is expected to be hit, unless shares rally back up past the 55p “discounted” price.

This could potentially leave underwriters UBS and Citi – and six other banks drafted in to offer support – saddled with losses.

B&B’s rights issue has been beset with problems from the start, dealing a major blow to management credibility and adding to the bank’s stock market misery.

The group, which has suffered rising arrears in its buy-to-let business and credit crunch losses, at first denied the need for any new funds.

It then made a U-turn in May, unveiling plans to raise £300m by offering new shares at 82p.

B&B was forced to cut the discounted share price further when the stock fell below this level.

And, under pressure from its underwriters after trading took a sharp turn for the worse, B&B reduced the amount it was asking shareholders for, instead selling a 23% stake in the company to private equity firm Texas Pacific Group.

The move infuriated investors, who were then angered further when B&B dismissed an alternative funding proposal from four of its biggest shareholders and financier Clive Cowdery’s Resolution group.

B&B refused Resolution access to its books, saying it was sticking by Texas Pacific’s investment.

But plans changed again two weeks ago when Texas walked away from its £179 million investment after the lender’s investment status was downgraded by a ratings agency – forcing B&B to revamp its fundraising for a third attempt.

The ratings downgrade also hit the group, by making it more expensive for B&B to raise funds in money markets.

There have also been questions raised over the heavy fees B&B is paying for its funding – around £55m to raise the £400m under the terms of the issue.