Bradford and Bingley 300p to 55p to 20p to nothing?

Bradford & Bingley, worth 3.2 billion pounds in March 2006, closed at 20 pence on Sept. 26 in London trading, valuing the bank at 256 million pounds

That's less than half the price it asked shareholder to pay for the 828 million shares it sold at 55 pence apiece in an August rights offering, 25% shareholders took up. 30% of the bank was then owned by banks like Santander, HSBC and Barclays that bought the remaining offering. B&B had 2.5m customers and 1m shareholders.

Standing in front of a room full of City analysts on the last Friday in August, Chris Willford had some good news.  Flashing up slide 10 on his presentation, the finance director of Bradford & Bingley boasted that a recent £400m fundraising “reinforced our position as the best capitalised UK bank”. His chairman, City grandee Rod Kent, agreed. “We have regained our position as one of the best capitalised banks in the UK,” he said. “Only where we have stretched credit criteria have we had a problem,” said Richard Pym, the City veteran who was installed as B&B’s new chief executive when the less than impressive results were revealed. “We are not going to be doing that again. We are well capable of riding out the current storm.”

The next day the decision by the British Government to nationalised B&B with a share worth of 0p was known to Robert Peston the BBCs financial news guru. Shareholders were angered at the move. One, Jon McKnight, called it "the most blatant case of legalised bank robbery this country has ever seen".
"Surely, at the very least, B&B's board should have called an extraordinary general meeting for shareholders to decide the way forward. It is customary in this country for owners to be consulted on what becomes of their property before it changes ownership. Anything else is classed as theft."

Santander, the group, which owns Abbey, will pay £612m for B&B's retail deposit business and 271 branch network. At close at 20 pence on Sept. 26 in London trading, the bank was valued at 256 million pounds.  Santander paid a share strike out price of 48p a share. Funding a banking business with deposits is 50 to 100 basis points cheaper than funding it wholesale so getting hold of £20bn in one fell swoop is probably worth anywhere between £250m and £500m, once capitalised.

The government also gave £14bn - a loan funded by the Bank of England - to allow B&B's retail deposits to be transferred to Abbey. A further £4bn is to be paid by the Treasury to cover those deposits not protected by the scheme. As of the end of 2007, there were more than 940,000 investors in B&B. Basically the government could afford to throw £18bn at Satander, the same sum which would have seen Bradford and Bingley survive into the next century!

Is the B&B insolvent? Actually no. Which you might think is a bit odd, considering all the fuss about the bank's future, and now its nationalisation and dismemberment. Its assets still appear to be higher than its debts.

The second cushion comes from the fact that B&B's shareholders and subordinated debtholders are being wiped out. This, too, can be quantified. According to B&B's accounts, they provide a £3bn buffer

Nigel Myer, a bank credit analyst at Dresdner Kleinwort, said the UK government has effectively "given a guarantee on all senior creditors of Bradford & Bingley" The guarantee becomes subject to European Union approval after six months "They intend for that continue to persist for all pre-existing obligations, but they can't promise it will without EU approval," added Myer.The continuation of these guarantee arrangements beyond six months will require the submission and approval of a restructuring plan in accordance with the European Commission's Rescue and Restructuring Guidelines. HM Treasury intends to submit such a plan shortly. In the credit default swaps market, dealers and other market participants are unsure whether the collapse of Bradford & Bingley constitutes a credit event, which would trigger payment of protection under CDS contracts. For Bradford & Bingley, "the government has specifically designed the rules so that it is not a CDS event," Myer said. On the other hand, the Financial Services Authority withdrew the bank's license over the weekend, which is "why there is no clarity".

After Gordon Browns Monday 29-08-08 'saving' of Bradford and Bingley to save all banks, all banks collapsed in price....
Royal Bank of Scotland Group 181.00p -12.98%
Alliance & Leicester 274.25p -4.19%
HBOS 142.00p -18.06%
Lloyds TSB Group 217.25p -13.45%

They fell the next day too...
Royal Bank of Scotland Group 179.00p -1.10% 
Alliance & Leicester 267.00p -2.37%
HBOS 122.4p -13.80%
and on that day, 30-08-08, the Irish government guaranteed all savings in Irish banks, even to foreign depositers. Irish owned banks stock prices rocketed and english customers emptied english bank accounts to fund Irish owned bank accounts. The same day the FSA was to start an Open Probe Into Shorting of Banks - which is the artifical lowering of a share price

The nearest situation was the governments handling of Railtrack
Railtracks shares were suspended at £2.80 in 2001.The Government considered that the decision to put Railtrack into railway administration was valid and justified. Shareholders initially received no compensation nor were they promised any. Railtrack shareholders formed two groups to press for increased compensation.  Geoffrey Howe was elected Chairman in 2002 to seek compensation for shareholders. He stepped down a few months later when the Government offered 262p per share which was enough to convince Institutional shareholders. The Railtrack Action Group abandoned legal action after what was the largest class action ever conducted in the English courts - there were 49,500 claimants, all small shareholders in Railtrack.RT Group plc (in voluntary liquidation) has made a number of payments to shareholders during the winding up of the company's affairs.
December 2003 200p
August 2004 43p
December 2004 9p
December 2005 8.5p 
and a payment of 1p per share in 2008.