Mortgages Uncovered

Bradford & Bingley building, whose notoriously accident prone rights issue finally got closed yesterday with a much better than expected take up, will get a £400 million capital boost, however, the mortgage lender still does face a precarious future.

Bradford & Bingley’s shares had hovered around the rights price at 55p and at the 11am deadline for taking up the offer it closed unchanged on the same day at 54.75p.

Take-up actually looked like being significantly better than 8% achieved by Halifax Bank of Scotland in its £4 billion rights issue in July, and is thought to have come in above 20%.

Those that are close to the offer though are said to be reasonably comfortable with results. Bradford and Bingley are due to announce take up of their rights issue soon.

Many shareholders will have made their decision, when the bank’s shares started traded at around the 55p price.

But almost all Bradford and Bingley’s 950,000 retail investors, who do own about 40% of the former building society, are still expected to reject the right to buy any new shares.

Finally, Citi and UBS have both fully underwritten the offer after the renegotiating of terms because B&B issued them with information that was not in date regarding the performance of its loans. The share sale is supported by 4 top shareholders who in turn have sub underwritten around £145 million of the total.

6 UK clearing banks also agreed to back the underwriters possibly being left with up to a 5th of the enlarged share base.

Even securing this extra capital will not signal an end to B&B’s financial problems.