The Yorkshire-based lender said its major investors were stepping in to back a new deal after a US private equity firm dramatically withdrew a £179 million cash injection last night.

It is the second time directors have had to alter their fundraising plans since first announcing they needed the extra money in May.

B&B shares dropped as much as 10% today. Collins Stewart banking analyst Alex Potter said: "Management have bungled here."

Texas Pacific Group (TPG) had been lined up to buy 23% of the company, with another £258 million coming from a rights issue. But TPG walked away after B&B was effectively flagged up as a greater investment risk by ratings agency Moody's.

The buy-to-let mortgage specialist, which has been hit by the credit market freeze and higher mortgage arrears, is raising the money to help shore up its finances.

B&B said a group of its largest shareholders including M&G Investment Managers, Legal & General Investment Management, Insight Investment and Standard Life Investments were now backing an enlarged £400 million cash call.

Panmure Gordon analyst Sandy Chen added: "In our view, B&B must now run the gauntlet of an emergency rights issue, more difficult funding conditions, and a rapidly deteriorating macro-(economic) environment."

B&B said its latest plans would raise £400 million after fees, and was being underwritten by banks Citi and UBS.

The lender said TPG's withdrawal happened after Moody's downgraded its unsecured and long-term debt ratings, which effectively tells the market that the firm is a greater investment risk.

B&B's executive chairman Rod Kent said: "Whilst we are disappointed that TPG intends to terminate its subscription agreement, I am pleased that Citi and UBS and our major shareholders continue to support our proposed capital issuance.

"Bradford & Bingley continues to be well-funded and the capital raising will reinforce our position as one of the better capitalised banks and one of the leading mortgage and savings banks in the UK."

The funding plan involving TPG had attracted a raft of criticism from investor groups.

The Association of British Insurers (ABI) branded it "unacceptable" because it removed the right of pre-emption for shareholders - in which new shares should be offered to existing shareholders in proportion to their existing holdings.

And the UK Shareholders Association (UKSA) also urged smaller shareholders - which hold around 35% of the group's stock - to vote down the plans.

The lender first announced in May a £300 million rights issue to help shore up its balance sheet, after earlier denying the need for the extra cash.

Then last month B&B announced it was bringing TPG on board, and reducing the size of the rights issue to £258 million.

A rival funding bid led by investment group Resolution, involving the injection of £400 million by a series of major investors, was rebuffed by B&B last week.

Analysts said it was unlikely that Resolution, led by financier Clive Cowdery, would make another offer.

Mr Chen added: "In view of the declining fundamentals and TPG's withdrawal, however, we think this hope may be in vain."

B&B is suffering amid a triple whammy of credit crunch-related write-downs on investments, soaring wholesale borrowing costs and rising numbers of borrowers falling behind with repayments.

It has been particularly vulnerable to the crisis in money markets because it previously raised more than a quarter of its capital through wholesale funds. The lender unveiled an £8 million pre-tax loss in the first four months of 2008 after arrears climbed sharply.

Many of B&B's smaller shareholders are former members of the building society who picked up stock when the society demutualised.

B&B's shareholders were due to vote on the TPG fundraising and rights issue on Monday but a meeting to approve the new plans will now take place the following week, the lender said.

Resolution was looking to take a stake in B&B as part of wider plans to spend £2 billion on smaller banks and merge them to create a larger and stronger group.

It is understood that the downgrading of the bank's investment status has made it unlikely that Resolution will make a new attempt to invest in B&B.

A spokesman for the investment group said today: "We are watching the banking sector to see how it develops alongside other financial services opportunities this summer."