MSE News: Blow for Bradford & Bingley shareholders

ESKIMO

Fact: Bradford & Bingley WAS SOLVENT when it was part-nationalised.

There was still some 'resudual' value in the depository (high-street retail side of things; current accounts, savings and ISAs etc). Otherwise Abbey, Banko Santander would NOT have bought it.

The mortgage side of B&B was pretty gash tbh, but could have been secured against any possible future profits, which it was most more than entitled to do.

From the literature shareholders received, despite being slightly misleading in their intentions and with lack of clarity to a future business plan (apart from attempting to raise £300m in new capital, then £400m with a considerable and substantial amount of interest and investment shown from TPG Capital (a leading global pricate investment firm, founded in 1992 with extensive experience with global public and private investments, seeking to invest in world-class franchises ocross a range of industries including financial services. They had more than $50bn of assets under management and offices in the US, Europe and Asia.) unfortunately not taking the 'bull by the horns' hence TPG later 'retreated' (sorry, 'withdrew'). B&B could have stood on it's own two feet. The poor thing was a good workhorse. "My 'Black Beauty'." *Sobs*

Example 1) The Glaziers who 'own' Manchester United FC. They did NOT use their personal assets, fortune or wealth to invest. They used banks like RBS to fund their greed. Leaving the club in diar financial constraints. The same could have been done B&B with some financial investment and support. It's not as though it didn't have any assets not to secure it against.

In my opinon the BODs panicked and tried to flog what they 'thought' was a 'dead horse', when in actual fact the poor thing pulled a ligament jumping over a few heardalls. Many others in my 'Grand National' analogy such as 'Lehman Brothers' 'Fannie May', 'Freddie Mac' and 'Northern Rock' all fell at the first hearall!

I think shareholders were robbed. Not allowed to sell shares as the markets closed for the weekend. Funny though that bankers have the option to 'sell, sell, sell'.

In my own, personal opinon, i feel that sharholders have a stong case (mainly against the BODs and 'Prospectus') but that's far as it goes as far as i can see. Plus they've got indemnity insurance. (I'll do some digging to find out who it's with.)

I rest my case, Your Honour.

ESKIMO

Mr. Peter J Clokeys ruling is unjust. It does not take into any consideration the option for any future payback with an extensive newly developed business plan to compensate for the TPG 'withdrawall'.

dunstonh

Fact: Bradford & Bingley WAS SOLVENT when it was part-nationalised.

There was still some 'resudual' value in the depository (high-street retail side of things; current accounts, savings and ISAs etc). Otherwise Abbey, Banko Santander would NOT have bought it.

So where did the £14 billion pounds from the FSCS go then to cover B&B?

ESKIMO

On 14 May 2008, the Board announced that it was proposing to raise approximately £300million in new capital net of expenses.

It was intended that the new capital would be raised by way of a rights issue, which gave shareholders the opportunity to buy new shares in proportion to their existing shareholdings.

The new shares were offered to shareholders at an issue price of 82 pence per share with a discount of 48% to the closing Bradford & Bingley shareprice on 13 May 2008 (when it was 158.75 pence) - which was the last trading day before announcement of the rights issue.

Before the proposed rights issue could take place, shareholders were asked being asked to vote on a number of proposals at an Extraordinary General Meeting (EGM) - which was to be held on 16 June 2008.

The rights issue would offer qualifying shareholders the right to buy 16 new 'ordinary' shares for every 25 existing ordinary shares already held.

Therefore, if like most people you received 250 shares when Bradford & Bingley was demutualised (became a bank and was floated on the London Stock Exchange in 2000) your holding of 250/25=10 10x16=160 [EMAIL="160@82p=£131.20"]160@82p=£131.20[/EMAIL]

Then, the EGM (arranged for 16 June 2008) was adjourned indefinately with the intention of being arranged on 7 July 2008.

Since the 19 May 2008 it was indicated that there had been a number of developments. On June 2008 B&B issued a Trading Statement which announced disappointing results for the four months to 30 April 2008, highlighting a more cautios outlook for the year. In addition, the Company announced that Steven Crawshaw had stepped down as Group Chief Executive with immediate effect as a result of a serious illness. It turned out to be a life-threatening cardiovascular one! Crikey or what!

Later the Board went on to determine that that it was appropriate to raise a larger amount of capital than previously envisaged. The capital was going to come from two sources: capital raised from shareholders (by way of a newly restructured rights issue) and an investment by a strategic investor, TPG Capital. It was intended to be £400m.

The newly restructured rights issue was planned to raise £258m in the form of an offer to qualifying shareholders of 19 new shares for every 25 existing shares held.

The new shares would be issued at 55 pence per share, which was a discount of 38% to the B&B share price of 88.25 pence on 30 May 2008.

This meant that (assuming you were given) your 250 'free' shares, this would equate to: 250/25=10 10x19=190 [EMAIL="190@55p=£104.55"]190@55p=£104.55[/EMAIL]

Phew! Glad i got that off my chest.

cardsharps

Like Northern Rock, B+B shares are rightfully worth zero. It's time to move on with your life, you can't win them all

ESKIMO

Haha, good question. Thought you might ask that.

Well, HM Treasury was under no legal obligation to 'bail' B&B out if that's what you are implying. Businesses go under all the time, right? Doesn't necessarily mean you have to 'prop them up' left, right and centre. Businesses can operate however they like if you think about it, they can operate in profit (like many legitimate SMEs), operate break-even like, say 'Ocado' (a barely scrape by to meet their high operating costs) or alternatively they can operate at a loss (as 'sabretoothtigger' mentioned) like say many banks (yet interestingly, the banks have an easier option of righting off, and back-dating any of their losses. (Which i believe is where the system is "fundamentally flawed".)

It could also be considered that there may have been some conflicting interests. The government was waving a blank cheque at Nothern Rock at the time.

In answer to your question; HMT 'had' 'reason to believe' that B&B had gone "tits-up". They cheated shareholders out by jumping the starting gun. Shareholders were'nt given the opportunity to sell. That is where compensation is due! The fact that shares (at the time) had 'no value' is irrelevant really. We all know how shares work, they are not based on a companys 'value' "persaye", they are dictated by market demographics, they dictate the price of the shares. It's got nothing to do with the state (government tbh) it was a private (ltd) company-come-plc (when it demutualised). It had its own insurance, underwritten. The state 'thought' it was doing 'everyone a favour' when in actual fact it shot down one of it's own Spitfires.

Many associated with B&B, it stood for quality customer service, the kind that the likes of NatWest and Lloyds TSB are rebranding with; "ohh, come into one of your local branches and have a cuppa with the Branch Manager and lets 'plan' your future." they took a leaf out of B&Bs book.

I recon that (if left alone) by now, B&B would have reasserted itself on the marketplace. It had a reasonable business plan, investments forecasts 2-years ago indicating new opportunities in the far east. Dubai, China, India etc. Look where B&B would be now if it hadn't have had it's life-support turned off by 'twitchy' govenment.

If i remember correctly, Gordon Brown was the chap who sold all our gold reserves (to the arabs) when they hit a rock-bottom, then invested the vast majority of it in Euros! *Bangs head on desk*. Ohh dear.

le_loup

Oh dear!
Another wounded investor who does not understand the risks in shares and is trying to start a crusade against everyone but himself.
Last one said it was the regulator, this one, THE GOVERNMENT.

ESKIMO

cardsharps wrote: »

Like Northern Rock, B+B shares are rightfully worth zero. It's time to move on with your life, you can't win them all

Who said anything about 'winning'? Oh don't worry I'm 'over it' like the 'cow that jumped over the moon'.

le_loup wrote: »

Oh dear!
Another wounded investor who does not understand the risks in shares and is trying to start a crusade against everyone but himself.
Last one said it was the regulator, this one, THE GOVERNMENT.

Crusade, nice idea but don't think i would carry or pick up enough weight (followers).

Large majority of the 935,000 shareholders only held 250 ordinary shares. HMRC are prepared to accept a 'Nil Value' for the right to receive compensation in respect of B&B ordinary shares where the holding was 1000 shares or less.

No, i didn't blame the government (as such) HMT wrongly took control of a solvent bank. It was still operating at the time it was taken into receivership. Shareholders had the rug ripped out, right from under their feet.

It was incorrectly propped up by the FSCS in the wrong place.

The BODs panicked and gave the impression that B&B started to rot inside out. I recon they did this to reduce their liabilty. - Clever, but wrong and illegal (but a pickle to prove on paper).

I still stand optimistic.

jamesd

ESKIMO, B&B's rot started at its core when it changed to borrowing short term on the money markets to fund long term mortgage lending. That worked until the money markets dried up. At which point, pop went the value of the shares as the company was destined for bankruptcy.

sabretoothtigger

Businesses can operate however they like if you think about it

It needs a banking license. Rather then revoke the license and eventually close down the entire operation in a normal bankruptcy they nationalised it, the idea being to save jobs and householders from being foreclosed on I presume.

Share holders dont mean diddly because you were effectively the operators and it failed. I presume B&B tried to find private buyers actually I remember reading this was attempted for weeks beforehand, Lehman did similar but even in 2008 the credit markets froze up and turned their backs on alot of companies I think.
Maybe that was wrong but it wasnt a government action directly that started their demise

I was a shareholder of B&B and its only blind luck that I sold at £3 or so. It wasnt why I sold but I do remember hearing a story on ITV about how anyone could get a mortgage regardless of income and I figured that was real trouble but in 2005 or so it didnt appear to mean anything in the stock market. I didnt realise it was the tip of an iceberg.

I bet right now theres all sorts of minor details and stories that relate to future failures, its really upto people to figure it out or not, sorry for your bad luck on this



Also the government has subsided banking for a couple years now I think. We never hear that much about these debt markets but behind the scenes B&B would have already received alot of help before the appearance of a collapse.
Their biggest creditor was probably government, for this reason it was well in order