B&B shareholders step in to plug funding gap

Jul 4 2008 LDP Business

In May the lender, which specialises in the buy-to-let mortgage market, first announced a £300 million rights issue to help shore up its balance sheet.

Then last month B&B announced it was bringing TPG on board, and reducing the size of the rights issue to £258 million.

A rival funding bid led by investment group Resolution, involving the injection of £400 million by a series of major investors, was rebuffed by B&B last week.

The lender is suffering amid a triple whammy of credit crunch-related write-downs on investments, soaring wholesale borrowing costs and rising numbers of borrowers falling behind with repayments.

It has been particularly vulnerable to the crisis in money markets because it previously raised more than a quarter of its capital through wholesale funds.

B&B unveiled an £8 million pre-tax loss in the first four months of 2008 after arrears climbed sharply.

Around 35% of the company’s shares are in the hands of private investors, who have holdings of up to 250 shares. Many of these shareholders are former B&B members who picked up stock when the society demutualised.