On Bradford & Bingley and TPG shopping around for bargains

I woke up this morning, train run, and back to base and it is raining in the London’s green belt. What a gray morning Hobbes!
I updated my MS Money, and everything seems alright. So far, we are staying afloat.

Close look at the morning markets and banks are going back up in the UK after yesterday’s storm sponsored by Bradford & Bingley’s 48% profit fall, translating in a 30% stock plunge that infected the rest of the British banks. But there was a white knight yesterday, well, a white cowboy in the form of private equity mavericks Texas Pacific Group (TPG).

Weren’t the pundits talking about a credit squeeze and the end of the private equity party? Well, TPG somehow managed to pull around £179m to invest in 23% of the otherwise walking dead buy-to-let specialist.

The buyout house has been looking for suitable financial services investments since the credit crisis started, and it made its first acquisition in April when it bailed out struggling US largest savings and loan business Washington Mutual. Texas-based TPG pumped in £1bn of its own money alongside £2.6bn from investors in its £28bn of funds.

And these are investments made with TPG’s own money, not debt. In hard times, cash is king. Buffet goes window shopping in EU Plc. pulling the wallet out for Mars and getting a slice of Wrigley gum at a bargain price. Now TPG goes from nothing to minority key player in finance faster than a speeding pulse travelling in a vacuum (yes, I had to look that one up).

And speaking of walking dead, TPG goes in and… Washington Mutual’s Chief Executive Kerry Killinger loses his position as chairman of the board and B&B’s Chief Executive Steven Crawshaw steps down with immediate effect due to sudden “ill-health”. Discharged without Honour.

Isn’t it ironic that an evil buy-out firm has to take steps to improve corporate governance in ailing firms?

The gloom-mongers are already complaining about possible job losses and the like, but I doubt that TPG will burden the bank with debt, the leaving management already did an awful good job on that chapter.


TPG says it will not run B&B, but the private equity will have considerable influence. They are playing with their own money. For the moment though TPG’s investment is about stabilising the bank.

TPG holds companies for on average around 5 years, so I tell the bank’s existing million small investors who left it to the managers, leave it to the Texans and stay by their side. Since you don’t seem to care about your own investments, pray to God but keep rowing to shore with TPG, at least it looks like THEY know where they are going.



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