Buyout firm Texas Pacific Group's plan to take a 23 percent stake in Bradford & Bingley, the troubled UK mortgage lender, alongside a £258 million rights issue, remains the preferred option after the board turned down investment group Resolution's £400 million capital injection.
Resolution's approach was part of a £2 billion move by Resolution to buy smaller banks and merge them with B&B.
The company said it “carefully considered” the Resolution approach but could not recommend the proposal to shareholders in its current form.
B&B is due to publish a prospectus on its cash call this week, ahead of a shareholder meeting on 7 July.
A number of B&B's institutional investors including Standard Life, Legal & General, Prudential and Insight are involved in the Resolution plans.
Resolution said its proposals could see it take a stake of more than 30 percent in B&B, without looking to take over the bank. The plans would be led and funded by B&B investors, with Resolution using its expertise in consolidation to enlarge and strengthen B&B.
Resolution said it will work with B&B, regulators, rating agencies, and the bank's investors over the next two weeks with a view to tabling a formal proposal by July 4.