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| Version 2 | Version 3 |
|---|---|
| Investor to shore up B&B finances | Investor to shore up B&B finances |
| (10 minutes later) | |
| One of the world's largest private equity houses is to take a stake of about 20% in Bradford & Bingley. | One of the world's largest private equity houses is to take a stake of about 20% in Bradford & Bingley. |
| The move by US investor Texas Pacific Group is to boost the finances of the UK's major buy-to-let mortgage lender. | |
| About £150m of funds would be injected into B&B, with existing stakeholders asked to provide £250m of new capital. | About £150m of funds would be injected into B&B, with existing stakeholders asked to provide £250m of new capital. |
| The news came as B&B's chief executive stepped down for health reasons, on the eve of a warning that its profits will be much lower than the City expects. | The news came as B&B's chief executive stepped down for health reasons, on the eve of a warning that its profits will be much lower than the City expects. |
| Stephen Crawshaw had quit "due to a serious cardiovascular condition", the firm said. | Stephen Crawshaw had quit "due to a serious cardiovascular condition", the firm said. |
| Lower profits | Lower profits |
| Bradford & Bingley is the UK's eighth-largest bank and the biggest in the buy-to-let market. | Bradford & Bingley is the UK's eighth-largest bank and the biggest in the buy-to-let market. |
| The former building society has more than three million customers. | |
| Bradford & Bingley has a trading problem, but it doesn't have the kind of problems Northern Rock had Robert PestonBBC Business Editor href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/">Robert Peston's blog | |
| But the firm has been hit hard by the credit crisis, and in May launched a rights issue asking current shareholders to inject £300m. | But the firm has been hit hard by the credit crisis, and in May launched a rights issue asking current shareholders to inject £300m. |
| The new plan represents a scaling back of that demand, but because of TPG's contribution, B&B would end up raising more than under the previous plan - about £400m in total. | The new plan represents a scaling back of that demand, but because of TPG's contribution, B&B would end up raising more than under the previous plan - about £400m in total. |
| The price of the new shares for TPG and for B&B's existing shareholders is expected to be a bit above 50p per share, well below the original rights price of 82p per share. | The price of the new shares for TPG and for B&B's existing shareholders is expected to be a bit above 50p per share, well below the original rights price of 82p per share. |
| BBC Business Editor Robert Peston said: "The reason it needs all this money is because its profits are going to be lower this year than the City had expected. | BBC Business Editor Robert Peston said: "The reason it needs all this money is because its profits are going to be lower this year than the City had expected. |
| "The City was expecting about £250m of profits this year. Unfortunately because of the downturn in the housing market, Bradford & Bingley is probably only going to make about £150m. | "The City was expecting about £250m of profits this year. Unfortunately because of the downturn in the housing market, Bradford & Bingley is probably only going to make about £150m. |
| "That's a big drop - but nonetheless note, it is still likely to be in profit." | "That's a big drop - but nonetheless note, it is still likely to be in profit." |
| One problem for Bradford & Bingley is that the housing market downturn has knocked the profits it makes from buy-to-let mortgages. | One problem for Bradford & Bingley is that the housing market downturn has knocked the profits it makes from buy-to-let mortgages. |
| WHAT IS A RIGHTS ISSUE? Companies issue extra shares to raise money They are offered to existing shareholders, usually at a discount to the current share priceShares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones Check Bradford & Bingley sharesCheck other banking shares | WHAT IS A RIGHTS ISSUE? Companies issue extra shares to raise money They are offered to existing shareholders, usually at a discount to the current share priceShares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones Check Bradford & Bingley sharesCheck other banking shares |
| The buy-to-let market in the UK is worth about 120bn, with B&B having about a fifth of that. | The buy-to-let market in the UK is worth about 120bn, with B&B having about a fifth of that. |
| The lenders' profits have been hit by a rise in the number of its borrowers who are experiencing difficulties making repayments on mortgages. | The lenders' profits have been hit by a rise in the number of its borrowers who are experiencing difficulties making repayments on mortgages. |
| A further squeeze on profits has come from a narrowing in the gap between the interest rate it pays for funds and the rate it receives from borrowers. | A further squeeze on profits has come from a narrowing in the gap between the interest rate it pays for funds and the rate it receives from borrowers. |
| Its share price has fallen by more than two-thirds in just the last six months - and fell 40% in the last month alone. | Its share price has fallen by more than two-thirds in just the last six months - and fell 40% in the last month alone. |
| But bankers and regulators say B&B's troubles are not comparable in gravity or complexity to those of Northern Rock. | But bankers and regulators say B&B's troubles are not comparable in gravity or complexity to those of Northern Rock. |
| Robert Peston says "people will draw parallels with Northern Rock, but I think those are the wrong parallels". | Robert Peston says "people will draw parallels with Northern Rock, but I think those are the wrong parallels". |
| He said he had spoken to regulators who said B&B had a trading problem, "but it doesn't have the kind of problems Northern Rock had, namely it doesn't have a problem raising vital finances to keep going." | He said he had spoken to regulators who said B&B had a trading problem, "but it doesn't have the kind of problems Northern Rock had, namely it doesn't have a problem raising vital finances to keep going." |
| Also, he said, TPG had a fearsome track record as an investor. | Also, he said, TPG had a fearsome track record as an investor. |
| "And the news that it is taking a substantial stake... may reassure the stock market that the worst could be behind B&B." | "And the news that it is taking a substantial stake... may reassure the stock market that the worst could be behind B&B." |