Bradford & Bingley is in real trouble now. They need to raise some cash for their balance sheet very quickly indeed, and would already be gone if it weren’t for the Bank of England’s Special Liquidity Scheme.

They had originally begun planning a rights issue some months ago with Citibank acting as advisor. When news of that leaked, their then Chief Executive decided it was better to deny all. A month or so after his denial, he had to leave, and they had to proceed with their planned rights issue, planned at 82p per share.

Except that they management accounts they presented for the rights issue weren’t quite accurate. B&B had to admit they were “out of date,” and the rights issue was abandoned.

TPG Capital stepped in at 55p per share, only to walk out of the deal last night having seen the books, using Moody’s downgrade of B&B** as an excuse. TPG clearly felt 55p did not accurately reflect the true state that the bank is in.

So today, in a last ditch effort to keep things honest, Standard Life, M&G Investment Managers, Legal & General and Insight Investment, which together own 14.25 per cent of B&B, have stepped in to fund £179 million as part of a £400 million fund raising deal that will also be priced at 55p a share.

When the FTSE opened this morning, there was an initial plunge to about 52p. However, this rebounded almost immediately. Bradford and Bingley’s shares were still trading around the 55.5p mark up until midday (much to the chagrin of FT commentators). After lunch, when the UKs version of the Plunge Protection Team seems to have run out of money, the price has plummeted, currently sitting around 49p.

So the question is, where does this leave the rights issue? In tatters, I would suggest, unless someone steps in to prop it all up a bit. Maybe that’ll happen by the end of the day.

For sure, though … anyone who sold their B&B stock before lunch made the right decision, anyone still holding on didn’t, the group of four rescuers has already lost roughly £30 million, and anyone with cash in an account there may well be finding out very soon just how good the government’s new savings guarantees aren’t.

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This entry was posted on Friday, July 4th, 2008 at 4:27 pm and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.