B&B surprises with rights issue

By Clara Ferreira-Marques and Chris Wills

LONDON (Reuters) - Lender Bradford & Bingley (BB.L: Quote, Profile, Research) surprised the market on Wednesday with an emergency 300 million pound cash call to bolster its balance sheet, just a month after saying it had no plans to do so.

The dramatic u-turn, after Bradford & Bingley said in April it was monitoring its balance sheet but was "not intending to issue equity capital by way of a rights issue or otherwise", sent its shares down nearly 11 percent to a record low.

The mortgage bank's executives, however, said the buy-to-let specialist had waited for markets to stabilise before going ahead with the deeply discounted share issue and the decision to pay a scrip dividend in order to strengthen its capital ratios.

"(The) stability of the markets is the moment we feel is the right moment to launch a rights issue, not in the middle of a maelstrom," Chief Executive Steven Crawshaw told reporters.

"That's the difference that a month makes -- it's the fact we have been able to see a much more stable period across the globe, and it's into those stable periods that a rights issue should be launched."

Wednesday's move is the latest in a series of fundraisings by global and UK lenders as they seek to rebuild their capital reserves following drastic writedowns of risky assets, and it will prompt fresh speculation that other banks, including rival Alliance & Leicester (ALLL.L: Quote, Profile, Research), could follow suit.

B&B said it had been encouraged by rights issues from Royal Bank of Scotland (RBS.L: Quote, Profile, Research) and HBOS (HBOS.L: Quote, Profile, Research), but also by Bank of England moves to ease market tensions.

The mortgage bank -- alone in not announcing hefty new writedowns alongside the share issue -- dismissed concerns its move hinted at a sharp worsening of the UK mortgage market or of capital markets and said its plan was to shore up dented shareholder equity and to maintain its capital ratios at their historic position at the top end of the UK sector.