BRADFORD & Bingley's GBP400m cash-call closed yesterday, and may leave six high street banks holding big stakes in the Yorkshire- based mortgage lender.

At 11am, the last moment for Bradford & Bingley shareholders to take up their rights, the lender's shares were at 55.25p - just a quarter-of-apenny higher than the rights issue price of 55p. The stock began trading yesterday morning at 54.5p.

The shares had been hovering around the 55p mark since the rights issue was restructured for the third time in June and presented shareholders with the dilemma of whether to take up their rights when they could buy shares on the stock market at a similar price.

The bank is turning to shareholders for money to boost a battered balance sheet, which has been hit by the worst slump in the housing market in more than 15 years.

The rights issue has been one of the most dramatic to take place in recent times in the City. It was first announced in May and was then repriced and restructured in June when the lender issued a profits warning and had to admit its chief executive Steven Crawshaw was too ill to continue running the bank.

Shortly afterwards, it had to be restructured again when TPG (Texas Pacific Group), a US-based private equity firm, withdrew its support when the lender's debt rating was downgraded.

Moody's reduced its longterm credit rating on Bradford & Bingley to Baa1 from A3 because of a "substantial deterioration in the bank's asset quality".

The result of the rights issue is not expected to be announced until Monday but it is thought that the underwriters - UBS and Citigroup - and the six high street banks and a number of City fund managers which are acting as sub-underwriters could be left holding much of the new stock.

UBS and Citi are expected to take up to GBP100m of the rights issue, which will total around GBP455m including fees. The remainder will be passed on through subunderwriting agreements to four top shareholders and to six clearing banks. This will spread the cost of propping up Bradford & Bingley over 12 institutions.

The lender will be hoping to win more support than Edinburgh- based HBOS, whose GBP4bn rights issue was backed by a paltry 8per cent of shareholders but analysts and investors forecast a modest take-up.

Banking analysts said the cash call is expected to more than double the current stock market value of Bradford & Bingley.

If the support from existing Bradford & Bingley shareholders is low, this suggests that Lloyds TSB, Barclays, HSBC, HBOS, Royal Bank of Scotland and Abbey, which is owned by Spain's Santander banking group, could end up with substantial stakes in the lender.

Four major City investors, Prudential's M&G, Standard Life, Legal & General and Insight, part of HBOS, are also supporting the cash- call.

About a third of the lender's shares are owned by private investors. It is thought they will have been unlikely to participate in the rights issue, meaning their stakes will be diluted.

Bradford & Bingley shares fell as low as 31p last month - hit by worries over the bank's future beyond the cash call and the impact of a deteriorating UK economy on the country's top buy-tolet lender - but have since bounced to 55p. They closed unchanged at 54.75p in yesterday's dealing in London, valuing the bank at GBP791m.

At a meeting in July to approve the cash-call, several investors criticised the Bradford & Bingley board over the steep slide in the bank's share price. The shares have lost more than three-quarters of their value since January.

Originally published by Newsquest Media Group.

(c) 2008 Herald, The; Glasgow (UK). Provided by ProQuest LLC. All rights Reserved.