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September 24, 2008

B&B credit rating on the brink of “Junk”

by Gill Montia

Story link: B&B credit rating on the brink of “Junk”

Buy-to-let lender, Bradford & Bingley (B&B), has had its credit rating adjusted.

Fitch Ratings yesterday downgraded the bank from BBB+ to BBB-, the lowest of the agency’s ten investment classes and only one notch above “speculative grade”, or in colloquial terms, “junk”.

Standard & Poor’s has also downgraded B&B’s short-term counterparty rating from A-2 to A-3, stating that constraints on the bank have increased materially in recent days.

Last weekend, reports in the press suggested that the Financial Services Authority (FSA) had renewed its attempts find a buyer for B&B.

The news, combined with the lender’s falling share price has led to speculation that B&B may not survive the turmoil of today’s credit markets.

National Australia Bank, Dutch firm ING and Banco Santander, the Spanish group that owns Abbey, are all reported to have been approached by the FSA.

Fitch is concerned that uncertainty over the future of the bank could prompt savers to withdraw their cash.

Shares in B&B closed at a record low of 24p yesterday but recovered slightly today on the news that a contract under which B&B had to buy a further £1.75 billion of mortgages from General Motors’ finance unit, GMAC-RFC, by the end of next year has been renegotiated.

 

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