Banks left with third of Bradford & Bingley shares

Nearly 30% of mortgage lender Bradford & Bingley will end up in the hands of other banks following its £400m (€502.6m) fundraising move, it was revealed today.

The rights issue's backers - investment banks Citi and UBS - as well as a clutch of high street banks - will hold almost 427 million new shares in B&B between them, representing 29.5% of its 1.45 billion shares in issue.

B&B began moves to shore up a balance sheet knocked by the credit crunch back in May, but has been forced to change its plans twice as concerns over its lending book grow in a housing downturn.

Under the current scheme, the lender offered for sale nearly 828 million new shares in a 67 for 50 rights issue.

Of these, just 27.8% - or 230.4 million - were taken up by investors, as shares were trading below the "discounted" 55p price of the issue.

This leaves Citi and UBS - as well as sub-underwriters rumoured to include six high street banks - with 597.3 million new shares.

However, the backers have agreed to sell more than 170 million of these shares to four major institutional investors who have supported the rights issue, according to B&B's investor relations department, leaving the banks with a near-30% stake in the enlarged company.

The banks have agreed not to sell their 426.7 million shares for at least 20 days under a "lock-up" agreement with B&B, which will stand unless there is a takeover approach for the business.

B&B first unveiled a £300m (€377m) rights issue in May at a discounted price of 82p. But shares fell below this level and following a profit warning it announced alternative plans to offer cheaper shares - as well as selling a 23% stake in the company to private equity firm Texas Pacific.

Texas walked away from its potential £179m (€224.9m) investment in July after a ratings agency downgraded B&B, forcing B&B to revamp its plans for the second time.