Filed under: Private equity

While there were challenges, it looked like Texas Pacific Group would snag a 23% equity stake in Bradford & Bingley PLC, a UK mortgage company. True, the deal was highly dilutive, but at the same time, B&B has been suffering from the credit crunch.

Now, TPG has walked away and instead, a syndicate of investors has rounded up $793 million to bolster B&B. Apparently, the company will need to raise even more capital.

Why? Basically, Moody’s Investors Service downgraded the debt of B&B because of rising mortgage delinquencies and continued balance sheet problems. As a result, the economics of the deal changed significantly. In fact, TPG had negotiated an “out” clause for such a scenario.

Actually, the deal implosion points to the fact that the credit crunch is global. It even appears that things may be getting worse, especially in Europe, where there may be a need for many more capital infusions for the financial services sector.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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