No support for BandB shareholders in case of complaints
Released on: June 4, 2008, 4:02 am
Press Release Author: First Choice Loan
Industry: Financial
Press Release Summary: The financial regulators of B&B have announced that it would not support the mortgage bank further if shareholders have complaints against rights issue. Shareholders however think that there is a lot more to the situation than what is being told.
Press Release Body: As announced yesterday, the financial regulators have warned to withdraw all support if the shareholders of Bradford & Bingley complain about the way the matter of the rights issue is being handled.
The Bradford and Bingley bank has three financial regulators which are the Financial Services Authority, the Bank of England and the Treasury. Sources which are close to these three regulators have commented that even if the situation cannot be called desperate, it is still a very serious stance for B&B. the way things have shaped up about the rights issue more or less reflects the financial situation of the mortgage bank.
The City was shocked on Monday when B&B ditched a rights issue of £300m at the cost of 82p per share and the price was lowered to 55p. Also, a 23% stake was sold to TPG Capital which is an American private equity investor.
B&B said that it had done this in acknowledgment of its 850,000 small shareholders. However, it emerged later on that UBS and Citibank had broken the deal which they had signed to underwrite the rights issue.
Financial analysts were simply shocked at the unexpected move that B&B and its underwriters had made.
Alex Potter from Collins Stewart got in touch with B&B shareholders so that he could vote against the rights issue which had been repriced so that the management would go back to the original scheme. He added that the underwriters of the rights issue were being paid very well and should be responsible for the risk if the shares were left unwanted and big losses incurred.
Potter said, "The management should have been outright straightforward about the rights issue. Since the underwriters felt misguided by the company, it points in the direction that there is a more dangerous management system. The renegotiation of the rights issue is no less than a disgrace to the company."
The cash call was earlier £24m and now it has risen to £37m. This includes the underwriting fees to UBS and Citibank of about £9m.
The representative of the small investors, Roger Lawson from the UK Shareholder Association says, "The repricing of the rights issue will make all shareholders lose confidence in the company and the management." He added that he doubts there will be many takers for the shares on sales and also that numerous private shareholders will vote against the new scheme. The investor group wants to bring it to the notice of the FSA in writing so that they find out the proceedings of the affairs of the company.
It is however believed by some that this request would not be paid heed to. One of the many shareholders believed that B&B was forced to reprice the shares and sell the stake to TPG by the FSA. He added that only those people agreed to such a deal who knew more than the common shareholder is being told.
The financial regulators said yesterday that the management accounts of B&B were six weeks behind and while signing the underwriting deal, the figures of the month of April were completely ignored. All this has led the management to believe that the mortgage arrears and lending margins were even worse than what is being projected.
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