British mortgage lender Bradford & Bingley plans to raise £300 million (€377.8 million) from its shareholders in a deeply discounted rights issue to strengthen its balance sheet, it said this morning.
B&B, which specialises in buy-to-let mortgages, said the fully underwritten issue of 16 new shares for 25 existing shares would be priced at 82 pence per share, a 48 per cent discount yesterday's 158.75 pence closing price.
The move is the latest in a series of fundraisings by banks across the world as they seek to rebuild their capital reserves following writedowns of risky assets triggered by the global credit crunch.
Royal Bank of Scotland announced a £12 billion rights issue last month, followed by HBOS, Britain's biggest mortgage lender, which raised $4 billion.
B&B said the proceeds would be used to boost its target Tier 1 capital ratio - a key measure of capital adequacy - to between 8 and 10 per cent, it said.
"The proceeds of the rights issue will strengthen the group's capital position and will mitigate the impact of the previously announced reductions in the value of certain of the group's treasury investments," it said in a statement.
B&B said it continues to trade in line with its April 22nd trading statement, but it will pay its interim dividend, due in October, in shares instead of cash.
"Taking into account the rights issue and writedowns announced in the group's Interim Management Statement released on April 22nd, 2008, the group would have had a pro-forma Tier 1 ratio of 10.1 per cent and a pro-forma Core Tier 1 ratio of 9.2 per cent as at December 31st, 2007," it said.
B&B is targeting underlying dividend cover of between 2 and 2.5 times underlying earnings over the medium term, it said.