Retail banks may be left with sizeable stake in B&B

Retail banks may be left with sizeable stake in B&B

Six high street banks could be left with stakes of at least 3% in Bradford & Bingley following its £400m cash call. B&B shareholders have until 11am today to subscribe to the rights issue, which has been restructured three times in as many months and is aimed at bolstering the balance sheet.

The buy-to-let lender's shares ended yesterday at 54.75p, unchanged, and 0.25p below the 55p-a-share at which the rights issue is priced. The shares have been trading at around this level since the issue was restructured for the third time at the start of June, presenting shareholders with the dilemma of whether to take up their rights when they can buy the shares on the stock market slightly cheaper.

The result is not expected to be known until Monday. But if investors have been deterred from participating, six high street banks - Abbey, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland and Barclays - could end up having to admit to the stock market next week that they hold stakes of more than 3% in the bank. The six have agreed to sub-underwrite more than half the £400m issue, which will double the current stock market value of B&B.

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If the take-up for the rights issue is minimal some of the big banks could end up with stakes of as much as 5%. Any stake higher than 3% would have to be admitted to the stock market under City rules.

The lender was prepared for low support for the issue following the results of fundraisings by HBOS and Barclays. Just 8% of HBOS shareholders supported its £4bn cash call and only 19% of Barclays shareholders participated in its £4bn fundraising.

The HBOS rights issue was hampered by the dramatic slump in its shares - below the issue's price - on a crucial decision-making day. The B&B share price has not been that volatile this week, which may have helped it garner more support.

But as a third of the shares are held by private investors who are thought to be unlikely to support the cash call - a throw-back to its days as a building society - the lender had prepared for a hole in financing by asking investment banks Citigroup and UBS to underwrite the cash call. Four big B&B shareholders - Standard Life, Prudential's M&G, Legal & General and Insight, part of HBOS, are also playing a crucial role.

This is the third attempt by B&B to raise funds. Its first rights issue, announced in May 14, was repriced and restructured in early June when it issued a profits warning and announced that chief executive Steven Crawshaw was too ill to carry on. At this point US private equity house TPG agreed to take a 23% stake, only to walk away when B&B's debt was downgraded.

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