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B&B dives to new low as City snubs latest fundraiser
Nick Goodway08.07.08
Bradford & Bingley's third attempt at raising desperately needed new funds with a £400 million rights issue suffered a further blow today as the City gave it the thumbs down.
The shares crashed to an all-time low, down 7p, or 14%, to 43p - a 22% discount to the rights issue price of 55p. Although the former building society should raise its money, given that is underwritten by Citigroup and UBS and backed by four of the bank's largest shareholders, its reputation lies in tatters.
That was no better summed up than by Pali International analyst Bruce Packard who, by slashing his shareprice target to zero pence, effectively said the bank is worthless.
He told clients: "We believe that deposit holders' money is safe but, from an equity shareholder perspective, we believe the investment is unattractive on a risk/reward basis. An embedded value approach (with admittedly pessimistic assumptions on margins and cumulative write-offs) suggests a net present value of 14p a share on a standalone basis."
Packard added that the further the price falls, the more likely there is to be a takeover bid for B&B, but one which involves little in the way of a premium.
The Financial Services Authority is monitoring B&B very closely and is probably up to speed with its latest trading, which should have been announced at today's aborted shareholders' meeting but should come later this week.
Societe Generale cut its target price from 55p to 40p, citing last week's downgradingof B&B's debt which it said "exacerbates the bank's funding difficulties...and makes it more difficult to write new mortgage business".
Fox-Pitt Kelton cut its price target to 43p but added ominously: "That assumes the rights issue does actually complete at 55p and that the FSA and Bank of England ensure the bank does not fail. However, we cannot rule out the possibility of an effective failure, with shareholders receiving little or nothing for their shares."
B&B chairman Rod Kent is under increasing pressure from investors after refusing to entertain a rival £400 million fundraising plan from Clive Cowdery's Resolution group two weeks ago.
Last week American private-equity firm Texas Pacific pulled out of its £179 million share of the second £400 million fundraising attempt.
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