B&B Shareholders 'Angry' Over Rights Issue

The release of details regarding the terms of the part sell-off of Bradford & Bingley (B&B) to a US private equity house is likely to provoke shareholder anger, the Daily Telegraph reports.

B&B has recently issued profits warnings due to the revenue-raising problems it is suffering in the credit crunch. This led the bank to plan a rights issue (the creation of extra shares in order to boost income) and to sell 23 per cent of stock to Texas Pacific Group (TPG).

However, an "anti-dilution" clause offered under the terms of the TPG deal is likely to prove controversial. The clause allows the private equity house to buy additional shares on the same terms even if another investor buys a further stake in B&B, in order to keep its overall holding at 23 per cent. This means that TPG would get to buy up shares in such a new deal even if they were offered at a discount; a privilege which would not be granted to ordinary investors.

Shareholder ire with B&B has already been provoked after the original terms of the rights issue were cut from 82p per new share to just 55p, after the bank's financial position degenerated still further. "I am very, very angry," an investor told the newspaper. "Many shareholders are exercised over their treatment by B&B."

Other terms of the TPG deal include an automatic year-long "lock-in" for private equity firm, which would see it barred from selling on its stake unless B&B as a whole was taken over.