Bankers forced to buy unsold shares in UK bank B&B
LONDON (Reuters) - Banks and institutional investors supporting a cash call by Bradford & Bingley will buy the 72 percent of shares not placed in the lender's rights issue, after an ailing stock price made it impossible to find other buyers.
The move, disclosed on Friday, will leave six of Britain's largest banks with around 20 percent of their embattled smaller rival, following a deal struck last month when a credit rating downgrade forced B&B BB.L to restructure its emergency 400 million pound ($747 million) cash call for the second time.
Investment banks Citi and UBS were left with the bulk of the mortgage lender's emergency rights issue when it closed last Friday with shares hovering just above a discounted 55p price.
Just under 28 percent was sold to shareholders.
They had until this Friday's close to place the rump of the stock, but shares in the country's largest buy-to-let mortgage lender have remained well below 55p.
Sources close to the matter had said on Thursday that Citi and UBS would likely have to turn to sub-underwriters -- including six retail banks and four institutional investors -- to spread the cost of supporting the mortgage lender.
B&B confirmed on Friday that UBS and Citi said no buyers were likely to emerge as shares remained below the rights issue level, and would instead be subscribing, along with the sub-underwriters, to the unsold 597 million shares at 55p each.
That is above Friday's closing price of 53p, implying a modest total paper loss of just under 9 million pounds for the underwriters and others supporting the share issue.
The investment banks also confirmed a lock-up agreement for themselves and sub-underwriters under which they will not dispose of their shares for 20 calendar days from Friday.
KEY SHARES
Sources familiar with the matter had told Reuters on Thursday that UBS and Citi were likely to fall back on sub-underwriting deals, including a deal with six banks -- HSBC (HSBA.L), Lloyds TSB (LLOY.L), HBOS HBOS.L, Barclays (BARC.L), Santander's (SAN.MC) Abbey and Royal Bank of Scotland (RBS.L).
The sources said on Friday that the agreement stood, leaving the clearing banks with a total stake of around 20 percent of B&B's enlarged share base -- or between 3 and 4 percent of B&B for the larger lenders and just under 2 percent for Abbey.
The banks had initially agreed to take up to 220 million pounds of the fundraising -- which totalled 455 million including expenses -- but that stake was reduced after 28 percent of the shares were sold in the rights issue.
Citi and UBS themselves are expected to end up with as much as 75 million pounds' worth of shares.
The remainder, around 94 million pounds of shares, will be taken by four top B&B shareholders -- Standard Life, Legal & General, Prudential's M&G and HBOS's Insight -- which had also agreed to sub-underwrite the issue. They also bought shares in the original cash call, the sources said, which would leave them with roughly a quarter of B&B's enlarged share base. Continued...
