B&B's cut-price cash call just got cheaper

By Steve Slater

LONDON (Reuters) - Sometimes a 48 percent discount just isn't enough.

Lender Bradford & Bingley was on Monday forced to slash the price of its already deeply discounted rights issue, firing a warning shot for others raising funds and prompting some analysts to urge shareholders to reject the offer.

Banks, hit by the credit crunch, are scrambling to rebuild capital as the prospects for the global economy weaken and B&B's move showed there is a risk of failure for those planning rights issues even at deep discounts.

Shares in the country's biggest mortgage lender HBOS and other banks facing rights issues, such as Switzerland's UBS, were hit as B&B's gloomy comments spilled across the European bank sector.

A profit warning and increasingly gloomy outlook for the housing market forced B&B, Britain's biggest lender to landlords, to cut the price of the rights issue to 55 pence a share from 82p.

The new price represents a discount of 65 percent to the share price before the original offer was unveiled on May 14, compared with a 48 percent discount at the previous price.

The bank now plans to raise 400 million pounds through the rights issue and a side-deal selling a stake to an outside investor. B&B had originally unveiled a 300 million pound rights issue in May which it has now trimmed to 258 million.

"It's symptomatic how tough times are for the banks," said Richard Hunter, head of UK equities at brokerage Hargreaves Lansdown, adding B&B's problems were heightened by its reliance on the property market and wholesale markets for funding.