Bradford & Bingley buy-out group ‘consider Paragon bid’

The buy-out group involved in Bradford & Bingley's ill-fated capital raising was today reported to be circling another buy-to-let lender.

TPG Capital, which courted controversy this month by invoking a clause allowing it to pull out of its £179m (€226.1m) B&B bail-out, is said by the Financial Times to be weighing up a bid for Paragon.

The UK's third largest buy-to-let firm confirmed yesterday it had received approaches from parties "who have expressed interest in evaluating potential offers for the company". It did not name them, but the FT said yesterday that Blackstone, another private equity group, was interested.

The bid speculation in the battered mortgage market indicates that buy-out firms believe there are bargains to be found amid the current turmoil.

Paragon's market value has fallen by almost 90% to £250m (€315.8m) after the credit crunch restricted the company's ability to write new mortgages.

In January it was forced into a deeply discounted rights issue in order to repay a £280m (€353.7m) bank facility. However, it has remained upbeat about its franchise and believes tenant demand will continue to improve in an uncertain house market.

Shares rose 31% yesterday after the company confirmed it was holding "exploratory" talks with possible bidders. The stock rose another 3% today.

TPG stepped into the B&B saga in early June after the buy-to-let lender had to restructure its first rights issue and brought in the firm as a strategic investor.

However, TPG shocked the City when a ratings downgrade for B&B led to its withdrawal, forcing the lender to restructure its fundraising for a third time.