Bradford & Bingley counts cost of private equity pull-out

Shares in Bradford & Bingley slumped today after its attempts to raise urgently needed fresh capital were hit by the withdrawal of US private equity firm TPG Capital.

The buy-to-let lender's share price tumbled in early trading, at one stage dipping below 55p – the price at which it hopes to sell new shares to investors through its bruised rights issue. But by noon the company's shares had settled at 55.25p, a 9% fall.

TPG ditched its plan to inject £179m into B&B last night, after ratings agency Moody's told the bank it was planning to downgrade its credit rating. The downgrade reflects Moody's view that B&B, which has been hit by the sub-prime crisis and the slumping UK housing market, is now a greater risk to investors.

Despite the sudden withdrawal of TPG, B&B's £400m cash call is still going ahead, with its major shareholders stepping in. Standard Life Investments, the bank's biggest institutional investor, said today that it was "positive about the long term prospects and happy to participate in funding the future of Bradford & Bingley".