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The B&B saga continues

The last two weeks has seen the saga of Bradford & Bingley reach new heights. News emerged today that US investment group Texas Pacific Group has withdrawn its £179m cash injection for the firm after learning that ratings agency Moody’s is to downgrade the bank once again.

But the tale does not stop there. The same four investors, which had backed a £400m bid by Resolution head honcho Clive Cowdery last week for B&B, have stepped in with the capital injection of the same amount.

While B&B last week refused to allow Cowdery’s group access to its books, the withdrawal of TPG has meant that B&B has had to rely on the same four investors, minus Cowdery, to provide it with some cash.

The move by Moody’s to downgrade the bank’s rating for the second time in the space of weeks allowed TPG the right to terminate its proposed investment made on June 2, 2008.

The bank’s senior unsecured and long-term debt ratings will be downgraded from A3 to Baa1.

At the time of Resolution’s offer, it made it clear that its proposals would provide a capital injection into B&B that is not conditional on maintenance of credit ratings or the uncertainty of a rights issue – unlike TPG’s offer.

Resolution’s bid was part of a £2bn consolidation drive to roll together small banks and mortgage lenders into one firm over two years.

But last week B&B said it had decided to deny Resolution access to its books because its bid appeared to be an attempt to take control of the bank.

It said it had concerns over lack of clarity over funding and ownership, details of voting and non-voting shares and also the fact that B&B felt the proposals amounted to taking control of the bank, but it says this was not reflected in the terms.

The new enlarged rights issue will have an unchanged subscription of 55 pence per share. Original underwriters Citi and UBS will continue to underwrite the enlarged rights issue.

B&B will now be postponing its EGM, which was planned for next week. It says this is likely to now happen in the week of July 14.

Executive chairman Rod Kent says: “Whilst we are disappointed that TPG intends to terminate its subscription agreement, I am pleased that Citi and UBS and our major shareholders continue to support our proposed capital issuance. B&B continues to be well-funded and the capital raising will reinforce our position as one of the better capitalised banks and one of the leading mortgage and savings banks in the UK.”

While the B&B saga continues it is clear the UK mortgage market should keep an eye on Cowdery’s plans with Resolution. Cowdery, who retained the Resolution brand after selling his closed life business to Pearl Group in May for £4.89bn, has already identified 15 other takeover targets.

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