B&B Faces Tough Times as Buyer Backs Out

UK mortgage lender Bradford & Bingley (B&B) has been dealt a heavy blow in its bid to shore up its balance sheet.

Private equity firm Texas Pacific Group (TPG) has walked away from a deal, which would have seen it buy up 23 per cent of B&B stock at a reduced price of £179 million. It is understood that recent downgrades to the bank's credit rating - a key indicator of financial health - had led TPG to decide against the buy.

However, after this decision was made public, it emerged that a group of four big financial firms will grant B&B funding of £400 million instead: Standard Life, Legal & General, Prudential and Insight are all involved in this deal.

The bank's previous plan to sell £258 million of new shares in order to raise extra revenue is now likely to be scrapped, due to the continuing erosion of B&B's value on the stock market. The overall value of shares in the bank has dropped by 90 per cent since 2008, and the stock dropped a further seven per cent on the London Stock Exchange this morning as the markets reacted to TPG's news.

Chairman Rod Kent indicated that the share sale was still likely to go ahead, however. "Bradford & Bingley 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," he said.