A KEY meeting of the Association of British Insurers will today discuss rising concerns about whether Bradford & Bingley's decision to restructure a rights issue overrode investor rights.
B&B sparked controversy when it scaled back its rights issue early last week from £300 million to £258m, or from 82p a share to 55p a share, and brought in outside private equity investors.
The embattled mortgage bank said as part of a restructur
ing it was selling a 23 per cent stake to US private equity giant Texas Pacific for £179m.
B&B said the Americans were taking up their stake at the new rights issue price of 55p.
However, it is understood a number of ABI institutions – which include some of Britain's leading insurers – were unhappy that the move was in breach of the principle that gives existing shareholders first call on any new shares being issued.
The ABI investment committee is due to discuss these concerns today and will then have until next month to put out an advisory document, ahead of B&B's extraordinary general meeting to approve the new rights issue next July. Some believe the ABI – whose members include Standard Life, Scottish Widows, Legal & General and M&G – will say B&B's move creates a dubious precedent.
The bank was also criticised as having "let off" its underwriters, Citibank and UBS, by allowing them to be released from underwriting the original, higher-priced rights issue.
However, other sources say B&B had to allow the renegotiation of the terms after stunning the market with an unexpected profits warning after the original underwriting terms had been agreed.
B&B revealed £8m of losses in the first four months of 2008, compared with a £107m profit in the same period last year.
It has been speculated that there might have behind-the-scenes regulatory pressure on B&B as well, with the Financial Services Authority keen to avoid a possible rerun of the Northern Rock collapse.
The full article contains 336 words and appears in The Scotsman newspaper.
