Bradford & Bingley (B&B) has said that more than a quarter of the shares offered under its £400m rights issue have been bought by shareholders.

The bank said that 27.8% of its new shares, which were on offer at 55p each, had been taken up by investors.

Other UK banks, including HBOS, Royal Bank of Scotland and Barclays, have sought to raise extra cash after being hit by the credit crunch.

Separately, B&B announced Richard Pym as its new chief executive.

Lacklustre performance

Despite B&B’s rights issue proving more successful than some recent rights issues by other banks, almost £300m of its new shares will be left with underwriters.

The underwriters – Citi and UBS – will now try to place the remaining shares by Friday.

The two investment banks are being supported by four major shareholders and six banks – HSBC, Lloyds TSB, HBOS, Barclays, Abbey and Royal Bank of Scotland. This could mean that some of the UK’s main High Street banks will end up owning a chunk of B&B.

The news comes as B&B announced it had appointed Richard Pym its new chief executive with immediate effect.

Mr Pym was a former group chief executive at Alliance & Leicester and retired in July 2007.

He is currently an independent non-executive director of asset management group Old Mutual and a non-executive chairman of car parts retailer Halfords.

Despite Mr Pym’s credentials, he is likely to face a tough ride at B&B, observers say.

“[Mr] Pym is a safe pair of hands, in our view, to try to shepherd B&B through the coming asset quality problems we feel it will suffer. However, we also feel he can do little to avert said problems,” said Collins Stewart analyst Alex Potter.

Troubled rights-issue

B&B’s rights issue has been restructured twice. The bank first announced an attempt to sell shares at 82p in May.

Then, as trading took a turn for the worse, B&B announced it had decided to sell a 23% stake in the firm to Texas Pacific, but the private equity firm later backed out.

WHAT IS A RIGHTS ISSUE?
Companies issue extra shares to raise money
They are offered to existing shareholders, usually at a discount to the current share price
Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones

Earlier this year, the Royal Bank of Scotland raised £12bn from its shareholders with a strong take-up in its rights issue of around 95%.

Barclays secured £4.5bn in new funding from a range of foreign investors, but only 19% of its new shares were taken up by existing investors.

Last month, HBOS said that only 8% of the new shares on offer were taken up in its £4bn rights issue.

In its statement, B&B added that there had been “no material change” in either current trading or the outlook for the company.

It is scheduled to release its six month results to 30 June on 29 August.

News reported by The BBC

A £400m rights issue at Bradford & Bingley (B&B) has closed, with analysts expecting that some of the deal’s underwriters will end up with shares.

Shares in B&B were trading at 55.25p when the deadline for the cash call finished on Friday – just above the 55p offer price for existing investors.

The take-up is forecast to be modest – though higher than the 8% seen last month in a rights issue by HBOS.

B&B, a buy-to-let loans specialist, has been hit hard by the credit crunch.

It is not expected to reveal how many shareholders took up the offer to buy extra shares until Monday.

The rights issue was underwritten by banks including Citi and UBS, along with HSBC, Lloyds TSB, HBOS, Barclays, Abbey and the Royal Bank of Scotland.

WHAT IS A RIGHTS ISSUE?
Companies issue extra shares to raise money
They are offered to existing shareholders, usually at a discount to the current share price
Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones

Rival cash calls

B&B’s rights issue has been restructured twice. The bank first announced an attempt to sell shares at 82p in May. Then, as trading took a turn for the worse, B&B announced it had decided to sell a 23% stake in the firm to Texas Pacific, but the private equity firm later backed out.

Earlier this year the Royal Bank of Scotland raised £12bn from its shareholders with a strong take-up in its rights issue.

Meanwhile Barclays has secured £4.5bn in new funding from a range of foreign investors.

Barclays announced last month that 19% of its new shares had been taken up by existing investors.

News reported by The BBC

The boss of Bradford & Bingley has quit “due to a serious cardiovascular condition”, the firm has announced.

Chief executive Stephen Crawshaw is leaving the UK mortgage lender with immediate effect, and will be replaced by chairman Rod Kent in the short-term.

Mr Crawshaw’s departure comes a day before a trading update and reports say the firm will issue a profit warning.

The firm has been hit hard by the credit crisis and is trying to raise £300m to boost its balance sheet.

In May, the firm said it would launch a rights issue in an attempt to help offset some of its weakening investment, having only a month earlier denied it would be seeking to raise funds.

WHAT IS A RIGHTS ISSUE?
– Companies issue extra shares to raise money
– They are offered to existing shareholders, usually at a discount to the current share price
– Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones

The Sunday Telegraph said Bradford & Bingley was expected to say profits would “fall well below analysts’ forecasts” of between £160m and £200m pre-tax.

And the Sunday Times reported the profit warning “is expected to be contained within the bank’s rights-issue document” which is to be sent out this week.

US housing slowdown

B&B saw its profits drop by almost half after writing down assets, including those linked to US mortgages.

Pre-tax profit fell to £126m in 2007 from £246.7m the year before.

As the UK’s biggest buy-to-let lender, B&B has 20% of that market which has suffered following recent market turmoil.

Banks worldwide have seen huge losses linked to problems in the struggling US housing market.

Problems started when borrowers in the US, with no or limited credit history, started to default in large numbers once interest rates became too high.

Many of those loans to so called sub-prime borrowers had been grouped together, repackaged and sold on to banks as an investment with high returns worldwide.

B&B, like other banks, has been asking for bigger deposits and raising its interest charges for new products.

The firm recently warned of a rise in mortgage arrears as borrowers found it harder to repay loans.

Competitors have also sought rights issues in an attempt to raise funds.

Royal Bank of Scotland is seeking to raise £12bn while HBOS wants to raise £4bn.

News reported by BBC