Bradford & Bingley closes books to Resolution

Bradford & Bingley (B&B) has denied Resolution access to its books as it tries to distance itself from the investment group's bid.

Resolution is planning to put £400 million into B&B as a part of a £2 billion scheme for the mortgage lender.

B&B is standing by its plan to go ahead with a £179 million investment deal with Texas Pacific Group (TPG) for a 23 per cent stake, augmenting a £258 million rights issues, but is not ruling out the Resolution move.

A B&B spokesperson said: "The door is still open and we are still open for conversations."

Resolution – headed by Clive Cowdery- is now believed to be planning its next move given after being refused due diligence access by Bradford & Bingley.

The investment group currently owns a 2.9% stake in B&B.

Since the announcement of the deal the B&B share price has increased from 66p on close of Monday to a current level of 77p.

This still compares with a year-high of 435.50p.

The bank – which is Britain's largest buy-to-let lender – has had a torrid 2008, slipping £8 million into the red during the four months to April, following an increase in defaults on its mortgage book and wholesale funding concerns.

Under the Resolution plans, B&B would remain a listed company, but the investment firm would take a controlling percentage of the shares in the organisation.

The funds for the deal are likely to come from the four shareholders in discussion with Resolution; Insight, Legal & General, Prudential and Standard Life.

Under the plans Bradford & Bingley would then become the corner stone of a larger collection of banks, consolidating the second tier of the banking sector.

Resolution is pushing for B&B's board to recommend its plan by July 4th.

The Association of British Insurers (ABI) has now urged shareholders to act with caution over the rights issue.

The body's Institutional Voting Information Service (IVIS) has placed an 'amber top' on the amended rights issue by B&B and proposed sale of a stake to TPG, indicating that considered judgement is required by shareholders in voting on the relevant resolutions.

Peter Montagnon, ABI director of investment affairs, said: "The proposals by Bradford & Bingley involve breaches of fundamental principles of sound governance which are unacceptable to shareholders and would normally automatically attract a red top, indicating our most serious level of concern.

"We have opted for an amber top after intensive consultation with our members and other relevant parties, and particular consideration of the exceptional circumstances facing the company."

He added "fundamental principles" were breached in the setting out of the rights issue, including the preferential treatment afforded to TPG both in terms of protection against dilution and the opportunity to participate in future fund raising on preferential terms.