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SHAREHOLDERS SHUN B&B'S RIGHTS ISSUE

New B&B chief executive Pym says few banks have cash for deals

Tuesday August 19,2008

By Andrew Johnson

MORE than 70 per cent of Bradford & Bingley’s shareholders shunned the bank’s troubled £400million rights issue, it was revealed yesterday.

It raises the prospect of Britain’s six biggest banks being stuck with millions of shares in the group if underwriters Citigroup and UBS fail to shift leftover stock — the rump — by market close on Friday.

The news came as B&B confirmed former Alliance & Leicester boss Richard Pym as chief executive. He will receive a guaranteed £2.25million package for his first year, supplemented by a further £1.5million in share options.

He held out little hope of the bank being sold in the short term, adding that he was committed to staying at least two years to sort out the mess. Pym expects to unveil a strategy in October.

In a statement, B&B said the 55p-a-share rights issue had been accepted by 27.84 per cent of investors.

About 13 per cent of the total rights were taken up by the big four institutional shareholders, Legal & General, Standard Life, M&G and Insight, which agreed to support the rescue deal.

Only 15 per cent were taken up by other investors — including B&B’s 850,000 small shareholders, who own
40 per cent of the bank.

If Citi and UBS fail to sell the rump, the six big retail banks — HSBC, Lloyds TSB, Barclays, HBOS, Royal Bank of Scotland and Abbey — will own about 3 per cent each.

“We’re all very big,” said one insider. “We have five days to place the rump.” B&B shares fell 0.75p to 54p.

Pym receives a base salary of £750,000, a guaranteed cash bonus of £750,000 over the next 10 months and a further £750,000 in free shares. His share options are worth money only if B&B’s share price rises above 55p.

He said a sale was unlikely, given the current uncertainty in financial markets and that very few banks had any money to do a deal, despite banks being cheap.

“The core buy-to-let business is very solid but, like any other bank, there are issues to address,” he said. “Obviously, there are some specialist loans which have very high arrears.”

Many of B&B’s problems stem from a deal to buy consumer loans from financial services group GMAC. Pym said he would be looking very closely at the deal.