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TPG to take 23% stake in UK lender

The US private equity firm will again provide rescue financing for a financial institution rocked by the subprime and corporate credit dislocations, this time agreeing to inject £179m in Bradford & Bingley.

Bradford & Bingley, the struggling UK buy-to-let lender, has agreed to sell a 23 percent stake worth £179 million ($353 million) to TPG, making the buyout firm its largest shareholder.

The latest financial institution to receive rescue financing from TPG, and the first in Europe, Bradford & Bingley said its balance sheet needed the boost as “difficult economic conditions” weigh down net revenues.

The investment coincides with a rights issue expected to raise some £258 million, underwritten by Citi and UBS.

TPG’s investment will be structured in two tranches, the first of which involves the purchase of 30.9 million new shares, or 5 percent of current share capital, at 55 pence per share.

The second tranche, subject to shareholder approval, involves the purchase of 294 million new shares, or 21 percent of the enlarged share capital, again at 55 pence per share.

TPG will be allowed to appoint two non-executive directors to Bradford & Bingley’s board. 

Matthia Calice, a partner at TPG, said in a statement that the company’s market position, coupled with the current cash injection, will provide the specialty lender a platform for growth.

Cleary Gottlieb and Linklaters were co-counsel to TPG.

The buyout firm is raising a $7 billion fund to target investments in distressed financial institutions. In April, it led a $7 billion capital infusion in beleaguered US banking giant Washington Mutual, with TPG agreeing to purchase a $2 billion stake.