Bradford & Bingley today said it rejected plans put forward by investment group Resolution to pump £400m (€505m) into the embattled UK mortgage lender.
The plan would replace B&B’s current fundraising and form part of a £2bn (€2.5m) move by Resolution to snap up smaller banks, and merge them with B&B.
B&B plans to sell a 23% stake to buyout group Texas Pacific Group and ask investors for £258m (€325m) in a rights issue. It is due to publish a prospectus on its cash call this week, ahead of a shareholder meeting on July 7.
The company said it “carefully considered” the Resolution approach but added it could not recommend the proposal to shareholders in its current form.
B&B institutional investors including Standard Life, Legal & General, Prudential and Insight are involved in the Resolution plans.
They are thought to have been angered by B&B’s decision to bring in TPG, a move which will dilute the value of their existing holdings.
Resolution said its proposals could see it take a stake of more than 30% in B&B, although it stressed it was not seeking to take over the bank.
It added that 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.
The interest from Resolution is the latest twist in the battle to bail out B&B, which has been hit by the turmoil in the housing and financial markets.
Earlier this month B&B reduced the amount it was asking shareholders for and slashed the discount price after a profits warning threw the rights issue scheme into doubt.
Resolution boss and financier Clive Cowdery, who made his name by consolidating closed funds in the life insurance sector, already owns a 2.9% stake in B&B, it emerged yesterday.
He relaunched investment vehicle Resolution earlier this year with the aim of buying and consolidating smaller banks and lenders in the UK banking sector since his insurance company – also called Resolution – was sold to Pearl.