Bradford & Bingley rivals take stake in fundraising

TOP banks that agreed to provide a safety net for Bradford & Bingley’s £400m rights issue could end up with a stake of almost 20% after shareholders failed to support the fund-raising.

Investment banks Citi and UBS look to be left with more than 70% of the mortgage lender’s twice-restructured rights issue ahead of today’s deadline with shares hovering just above a deeply discounted 55p.

Just under 28% of the rights issues was sold to shareholders.

Citi and UBS have until the end of today to place the “rump”, or remainder of the stock, but B&B shares have languished well below 55p for much of the week.

It is thought that the two investment banks will now fall back on sub-underwriting agreements, including a deal with six clearing banks – HSBC, Lloyds TSB, HBOS, Barclays, Santander’s Abbey and Royal Bank of Scotland.

The underwriters have until the close of trade on Friday to sell the 597m shares unsold in the initial issue. B&B is expected to disclose the results of the placement on Tuesday.

Citi and UBS are expected to end up with as much as £75m worth of shares, depending on their success in placing the rump.

Initial underwriting agreements had seen the clearing banks sign up to as much as £220m of the rights issue, which totalled £455m including expenses.

All institutions taking part in the sub-underwriting are reported to have signed up to a 20-day lock-up period during which they cannot sell the B&B shares on the market.

B&B’s rights issue is the latest of several such cash injections by banks hit by the credit crunch, following HBOS and Royal Bank of Scotland.