Bradford & Bingley shares fell sharply today, despite the bank’s announcement of plans to salvage its £400 million cash injection package. That collapsed after the US Cavalry, in the shape of private equity firm Texas Pacific Group (TPG), rode away from the deal last night.

TPG had agreed to pay £179 million for a 23% stake in the bank, but lost interest after credit rating agency Moody’s announced that it was downgrading B&B’s debt for the second time in little more than a month.

B&B, one of the country’s biggest buy-to-let lenders, now needs to raise the entire £400 million in a rights issue, which it says has the backing of City institutions Legal & General, Standard Life, M&G and Insight Investment (part of HBOS) - B&B’s largest shareholders. The bank had previously only been looking for £258 million from its investors.

The institutions named by B&B as backing the rights issue, which is priced at 55p, are the same ones that supported investment group Resolution’s plan to gain a controlling interest in B&B, which collapsed last week after the bank refused to allow Resolution access to its books.

The FSA played a decisive role in putting together the new finding package, according to the BBC, on the grounds that it would have been disastrous for confidence in the bank if the money had not been forthcoming.

So, relief all round among depositors and creditors. But B&B is not out of the wood yet. Moody’s statement cited "substantial deterioration in the bank's asset quality" and warned that payment arrears on its buy-to-let mortgages would get worse in the coming months.

B&B chairman Rod Kent may now be forced to resign by disgruntled shareholders. 

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