Shares Slip As Bank Confirms US Deal
Tuesday, 03 June 2008

Sky News

Shares in mortgage lender Bradford & Bingley have plummeted 30% this morning after the bank issued a profits warning and confirmed a deal with a US private equity company.

The company has been hit hard by the credit crunch, with profits suffering in the face of the housing market downturn and the soaring cost of borrowing on wholesale money markets.

Now, the firm has confirmed an agreement to sell a 23% stake in the business to Texas Pacific Group (TPG) in return for £179m in funding.

Bradford & Bingley warned it faced increasing levels of arrears and said profits for the first four months of this year amounted to £56m, compared with £108m in 2007.

The company also scaled back its recently-announced rights issue, with shareholders now being asked to raise £42m less at £258m.

The bad news comes just a day after the company's chief executive Steven Crawshaw stepped down for health reasons.
Executive chairman Rod Kent said: "The last few weeks have been challenging for Bradford & Bingley, and this is a disappointing trading update reflecting a more difficult market environment."

But he remained optimistic, adding: "I understand shareholders' disappointment. Nevertheless, I am delighted to welcome TPG as a major strategic investor in Bradford & Bingley.

"With a strengthened capital base and the skills that TPG will bring I am sure we can develop the business to exploit the opportunities available in our markets in the medium term."

Bradford & Bingley previously raised more than a quarter of its capital through the wholesale money markets, which have dried up amid the credit crunch.

But the firm's troubles are not on the same scale as the ones that crippled Northern Rock in 2007.

Last year, Bradford & Bingley made pre-tax profits of £336m, but this year analysts had predicted a figure between £160m and £200m, a range which the company now believes is too high.

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