UK - TPG pulls out of B&B deal

nicola
04 July 2008

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TPG Capital, which had been planning to invest £179m into mortgage lender Bradford & Bingley for a 23% stake, has pulled out of the deal after ratings agency Moody's confirmed last night that it intends to drop the banks credit rating, giving the private equity firm the legal right to abandon the deal.

The decision has prompted the FSA to activate a back-up plan, under which some of the bank's largest shareholders will give their backing to a capital increase. The deal will see B&B continue to raise the planned £400m through an expanded rights issue priced at 55p a share, underwritten by UBS and Citigroup. The shareholder group is led by Legal & General, M&G, Standard Life and HBOS, all of which had previously supported a failed rival bid to TPG.

The move is likely to be damaging to TPG's reputation and its relationship with investors, as it previously given assurances to B&B executives that it would not abandon the deal, and may jeopordise its plans to make further investments into financial institutions in the UK.