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The group's four largest shareholders, including Standard Life, M&G, Legal & General and HBOS's Insight are said to be supporting the enlarged rights issue, though B&B has yet to give details on the rights allocation.
TPG exercised its right to pull out of the planned 179-million-pound investment after Moody's downgraded B&B's credit ratings Thursday, B&B said.
Shares in B&B plummeted on the news in Friday morning trade, down 8.61 percent to 55.75 pence at 12:16 p.m, fractionally above the group's rights issue price of 55 pence.
Bradford & Bingley, the UK's biggest provider of buy-to-let mortgages, is revising its capital raising for the third time. TPG swooped in to rescue Bradford & Bingley after the group initially planned to raise 300 million pounds by selling new shares to existing investors at 82 pence each. However the bank's share price fell steeply, eroding most of the original rights issue's 48 percent discount, and raising the prospect that investors would not support the fund-raising exercise. This led to B&B's revised plans last month, involving a cash injection from TPG which enabled B&B to cut its rights issue size to 258 million pounds.
B&B said Friday that shares will remain at 55 pence per share in the latest plans for its rights issue.
Citi and UBS will continue to act as underwriters, the bank said.
Shareholders, who were due to vote on a timetable for the investment on Monday, will instead meet in the week beginning July 14, B&B said.
The bank's executive chairman, Rod Kent, said: "whilst we are disappointed that TPG intends to terminate its subscription agreement, I am pleased that Citi and UBS and our major shareholders continue to support our proposed capital issuance."
The major shareholders, said to be supporting the capital raising, were also backers of an alternative proposal from Clive Cowdery's bid vehicle, Resolution Ltd, to inject 400 million pounds into the group. The proposal was scrapped last week, following resistance from the B&B board.
The management is now facing criticism in light of TPG's withdrawal from the capital raising plans.
"The management appears to be in an almost untenable position," Leigh Goodwin at Fox-Pitt, Kelton told Thomson Financial News. "B&B turned Resolution down based partly on the exclusion of small shareholders, who are unlikely to participate now anyway, and partly on the apparent certainty of execution of the TPG deal," he said.
"They knew a possible downgrade was coming but hadn't locked-in TPG. The have misjudged it completely," he added.
The outlook for Bradford & Bingley shares is weak, say analysts, which will impact the uptake of the right issues, and possibly leave large chunks of shares with the underwriters.
"There is a very real risk that achieving 400 million pounds of funding at 55 pence will not be possible," said Numis, adding that this will further hit the credit rating of the group. Numis upped B&B's bankruptcy probability to 25 percent.
But Alex Potter at Collins Stewart said that in spite of the latest news: "We categorically do not believe there is a material risk of depositors losing money. This is not Northern Rock," he said.
The Financial Times reported Friday that TPG's decision prompted the Financial Services Authority, the financial watchdog, to activate a contingency plan under which some of the bank's largest investors would back the capital increase, suggesting that the watchdog is monitoring the situation closely.
A spokesman at the FSA told Thomson Financial News that it is "of course speaking to all the players involved", but declined to comment further on the speculation.
Triggering the latest development in the capital raising saga, the downgrade of senior unsecured and long-term debt ratings from A3 to Baa1 at Moody's will also lead to higher funding cost. Moody's pointed to the substantial deterioration in the bank's asset quality in 2008, which is expected to continue into 2009, and the group's continuing obligation to acquire mortgages from GMAC RFC of up to 350 million pounds per quarter until 2009.
The deteriorating housing market, the macroeconomic downturn and the emergency rights issue, which will delay the capital raising process, are all set to push the share prices lower, say analysts.
Panmure Gordon & Co. now expects B&B to generate losses through to 2010, maintaining its 'sell' position on the stock.
But some hope comes in the form of Cowdery's Resolution Ltd potentially returning to the table with another offer, though this is expected to be lower than its initial 72 pence per share. However B&B's new credit rating may act as a deterrent to Resolution Ltd, after it specified it was looking to create a bank, through consolidation in the market, targeting an AA rating. lorraine.turner@thomsonreuters.com lht/slj/lht/cmr
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