Bradford & Bingley hit hard by TPG rejection

The US buyout firm's abandoned cash injection forced an overnight rescue by the lender's existing shareholders, who have been offered similar terms. The share price has fallen below the price of the rights issue.

Shares in Bradford & Bingley fell this morning after the withdrawal of TPG Capital, the US buyout group, last night forced an emergency bail-out by existing shareholders.

The beleaguered UK lender had been counting on TPG providing a £179 million capital injection to bolster a £400 million cash call, which the market had met with limited enthusiasm.

TPG exercised its right to walk away last night, after ratings agency Moody's told the bank it intended to downgrade its credit rating, because of fears the declining UK housing market made the bank a greater risk.

The cash call is still going ahead with major shareholders, some of whom had backed UK financial services entrepreneur Colin Cowdery in a late attempt to usurp TPG, stepping into the breach.

B&B’s share price slumped in early London trading, at one stage dipping below 55p – the price at which it hopes to sell new shares to investors through a rights issue. By 9.00 BST the company's shares had settled at 55.25p, a 9 percent fall.

Despite the sudden withdrawal of TPG, B&B's chairman Rod Kent said this morning that he was disappointed by TPG's decision to exercise a pullout clause triggered by the Moody's downgrade to Baa1 – the lowest credit rating of any major UK bank – but insisted that the rights issue will continue.

It is thought that the new fundraising will take place at 55p a share and remain underwritten by investment banks Citi and UBS, which had been involved in the decision to reprice the original rights issue.