Are Mayfair’s finest having a crack at Bradford & Bingley?
The bank last week announced a £300m, 16 for 25 rights issue, priced and underwritten at 82p. On Monday, the stock, which has lost more than half its value this year, shed a further 10 per cent. The stock hit a new all-time low of 120p.
The falls mean that the stock is now trading below the theoretical ex-rights price of about 129p at the time the issue was announced. At Monday’s lows, the TERP is down to about 105p. Still someway off the 82p pricing - but the discount to the TERP has narrowed from 36 per cent last Wednesday to 21 per cent. Will underwriters Citi and UBS be getting nervous?
Two, related, schools of thought on Monday. One held that the sell-off was prompted by continued worries that the ailing UK housing market could prompt a slew of bad debts for the niche buy-to-let and self-cert lender. B&B said last week that it would use its improved financial strength to enhance its competitive position, writing “selective good quality business at attractive margins.” B&B’s exposure to troublesome areas is nothing new - but the lack of a signal from the company of a pause or pullback may have put the frighteners on a skittish market. The other camp was pointing fingers towards W1 citing suspicions that the hedge fund mob, already short the housing market and B&B, might be setting its sights on a revaluation of the rights.
So should someone be alerting the FSA?
Oh, wait a sec. Damian Reece, head business honcho at the Telegraph already has. But he’s gunning for B&B, not rushing to their defence as the paper did with HBOS, hit by those nasty rumour-monguering bank robbers.
Team Telegraph issued an update on their complaint to the regulator over the weekend, noting that the FSA has come back to say that it doesn’t comment on individual firms. Reece wrote:
If the FSA’s reply to my letter means it won’t be investigating the affair then we will simply redouble our efforts to prove that our story was accurate.
If this case is not worthy of investigation then I don’t know what is. The FSA proved itself lacking, to say the least, over Northern Rock. Surely it’s not going to repeat the mistake again so soon.
Related links
The B&B rights issue statement
Lina Saigol: banks and capital raisings - FT.com
