Bradford & Bingley rights issue gets green light
Bradford & Bingley shareholders have backed the bank’s £400 million cash call to help boost its balance sheet.
Rod Kent, executive chairman of Bradford & Bingley, told members: "We're pleased that our shareholders have voted in favour of the enlarged rights issue, the proceeds of which will strengthen our capital base, ensuring we remain one of the better capitalised banks in the UK."
The bank was forced to expand its rights issue early in July after the American investor it had lined up to take a stake in the business, got cold feet.
Originally, Bradford & Bingley planned to raise £258 million through a rights issue and £179 million from private equity firm Texas Pacific Group (TPG), which would then take a 23% stake.
However, after TPG backed out of the deal, Bradford & Bingley decided to raise the full £400 million through a rights issue.
A way a company can raise capital by creating new shares and invite existing shareholders in the company to buy these additional shares in proportion to their existing holding to avoid a dilution of value, which means keeping a proportionate ownership in the expanded company, so that (for example) a 10% stake before the rights issue remains a 10% stake after it. As an added incentive, the new shares are usually offered below the market price of the existing shares, which are normally a tradeable security (a type of short-dated warrant) and this allows shareholders who do not wish to purchase new shares to sell the rights to someone who does.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
Every limited company must hold an annual general meeting for its shareholders once a year to consider the company’s accounts, reports of directors and auditors and it is the only opportunity for shareholders to express their feelings to the board of directors. Shareholders also vote on the appointment/re-appointment of directors, although this may be sent to shareholders as a postal ballot.