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Shareholders in legal fight with B&B for damages
EXCLUSIVE: Angry Bradford & Bingley shareholders are mounting a legal case against the bank and its directors to claim damages following the collapse of the mortgage lender last year.
The case relates to the bungled 400m rights issue to which many shareholders subscribed in the belief it would bail out the troubled bank and put it back on an even keel.
But just a month later, B&B's mortgage operations were nationalised and its savings business was sold to Spanish bank Santander.
The Bradford & Bingley Rights Issue Action Group represents 1,200 small shareholders who believe they were misled about the bank's financial situation.
Solicitors Leon Kaye, who are acting on behalf of the action group, are to submit a lengthy claim letter before the end of January having received counsel's opinion that the shareholders have a strong case.
Senior partner Leon Kaye said the group has received written opinion from an experienced commercial barrister that the shareholders are on strong ground.
The case will be made against both the former directors and Bradford & Bingley itself, which is now in Government ownership.
Mr Kaye said the action group is confident that its claim will be successful and shareholders will be entitled to 100 per cent of their money back.
"Shareholders were misled," said Mr Kaye. "Many were unsophisticated investors who relied on the contents of the prospectus."
Last July private equity firm Texas Pacific walked away from a 179m rescue investment in B&B at the last minute following an adverse report by credit rating agency Moody's.
"Notwithstanding this report, Bradford & Bingley revamped the prospectus and went ahead regardless," said Mr Kaye. "The information that Moody's had access to was alarming and was not properly brought to investors' attention. These small investors who invested tens of millions of pounds were not told the true facts."
Hundreds of thousands of investors took up the rights issue, buying some 28 per cent of the shares.
The action group maintains that shareholders should have been provided with all appropriate information leading to the Moody's downgrade and the serious risks arising out of this.
"It is not considered that the shareholders received this information," said Mr Kaye. "We believe the rights issue proceeded in a rapidly developing financial and banking crisis and that it was wholly inappropriate in the known circumstances to seek further investment from members of the public."
The action group is working in co-operation with influential investor lobby group the UK Shareholders Association (UKSA).
Communications director for the UKSA Roger Lawson said:
"Bradford & Bingley shareholders are dissatisfied that they were asked to subscribe to the rights issue on misleading grounds only a short time before nationalisation."
Shareholders can contact the Bradford & Bingley Rights Issue Action Group at www.leonkaye.co.uk/bradfordandbingley.html
Many of B&B's one million small investors received shares in the bank when it demutualised in 2000.
The majority are based in Yorkshire and Lancashire. The Lancashire connection dates back to B&B's takeover of Hyde Building Society in 1981.
Last month the Yorkshire Post revealed that a separate lobby group called The B&B Action Group is demanding a public inquiry into the bank's nationalisation.
The B&B Action Group, which represents 2,000 small shareholders, is calling on the Government to explain why B&B was nationalised just weeks after the board said the bank was "completely viable as an independent entity".
BBAG chairman David Blundell said small shareholders are furious that the Government has bailed out the big banks, but failed to step in to save B&B and Northern Rock.
"Many shareholders are demanding to know why the Government is throwing money at big banks in Scotland and London, yet small banks like B&B and Northern Rock whose roots are based in the North of England have been disadvantaged," said Mr Blundell.
The BBAG is to hold a public meeting in Bradford early next month.
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