Bradford & Bingley - falling to the bottom feeders and union bashers

Just what is going on at Bradford & Bingley ?

The “gang of four” large shareholders – M&G, Legal & General, Standard Life and Insight have supported a bid from Clive Cowdery’s company Resolution - but B & B refused access to the books.

This gives TPG (introduced by Goldman Sachs who have earned loadsamoney in the past from advising them) a clear run gaining control as a 23% shareholder.

Unsurprisingly the shares crashed 16¾p (21%) to 63¼p today when the news was announced at mid-day. “The board has consistently made clear to Resolution that it was prepared to allow due diligence should an acceptable indicative proposal be made,” the bank said. It said that the revised proposal did not meet the board’s concerns about certainty, funding, clarity, change of control and price.

B&B reported losses of £8m in the first four months of 2008, with rsing and accelerating arrears on its mortgage loan book. Margins are evaporating and a credit downgrading is likely any day.

What TPG ("our investment philosophy has been to create value by investing in change ")intends to do with B&B , remains unclear.

TPG have clearly obtained control with only 23% of the shares and their cash injection plus the the rights issue and using the Bank of England special liquidity scheme will provide some stability - which could be thrown of course by a credit re-rating.

Whether it is enough capital (given first quarter losses) to finance new lending puts B&B’s current business model in question.

Which suggest that if the B&B retail depositors decide to do a Northern Wreck and take their money and run could simply lead to the bank to stop writing new business and go into run-off.

With the dramatic run down in sales, the loss of B&B would hardly be noticed by borrowers, although staff might miss their jobs - see factoid.

Barclays with the proposed injection of £4.5 Mn of Asian money saw shares drop 2% today (down 5.75 p @ 298.00 p 289 at one stage in day) due it is said to Citigroup suggesting that £9 Bn more capital is needed - always supposing the right offs announced still haven't left the balance sheet with more fiction than fact.

TPG : History Lesson - "Texas Pacific Group's takeover of Gate Gourmet leads to "meticulously planned assault on trade unions"
Gate Gourmet, the catering division of SwissAir, was bought by Texas Pacific Group in the wake of the airline company's bankruptcy in 2002 . At the time of its acquisition by TPG, Gate Gourmet employed over 25,000 workers in 29 countries with 140 flight kitchens. For 2005, the figures are 22,000 workers and 109 flight kitchens. The path to "organic growth" at Gate Gourmet began with a meticulously planned assault on trade unions.

This began with the well-known struggle at Heathrow Airport in the UK, which was kicked off by the company stealthily hiring hundreds of contract workers in a restructuring program centered on mass dismissals and a dramatic degradation of employment conditions. (the dispute which began on August 10th when the airline caterer sacked almost 800 workers at Heathrow Airport.) The anti-jobs, anti-union offensive then moved to Germany's Düsseldorf airport, where (at the time of writing in late February 2006), members of the IUF-affiliated Food and Allied Workers' Union NGG have been on strike since 7 October 2005 over the company's refusal to negotiate wages and compensatory measures for increasingly arduous working conditions.

Under duress to improve returns for TPG's investors, Gate Gourmet not only put pressure on the T&G, but on its main client, British Airways, which it pressed for concessions on its contract.

Exit by Stealth: TPG Completes Sale of Gate Gourmet Reuters March 2nd 2007
"A day after Texas Pacific Group [TPG.UL] joined other powerful private equity in a call for more transparency, the firm's mystery sell-off of Gate Gourmet reveals just how much work the industry has ahead of it. TPG, which bought the airline catering firm in late 2002 from Swissair, has quietly reduced its stake in the business over the past year without any disclosure, selling the last piece to Merrill Lynch on Thursday."

TPG walked away from a highly leveraged Sainsbury's bid - they could still walk away from B&B.