Rod Kent, the embattled chairman of Bradford & Bingley, will launch a charm offensive this week to persuade furious shareholders that the new rights issue and rescue package put together last week with TPG was the only way to protect the bank.
Mr Kent said on Friday: "I can understand fully why shareholders are angry. We want to explain to them why bringing in TPG was the best option for all shareholders. I'm not saying there would have been a run on the bank, but certainly if we had gone ahead without this investment we would have seen the shares fall even further. We had a difficult choice and this is the one we felt we had to make."
Mr Kent, who is also acting chief executive until a replace ment is found for Steven Crawshaw – who has left because he is unwell – added that he is keen to reach B&B's army of 950,000 small shareholders, who owned about 40 per cent of the bank. "I want to contact as many as possible to demonstrate to them that inviting TPG in as a shareholder is in their interest."
He admitted again that management at B&B had not been up to scratch. "I'm not blaming any meltdown in systems – this was more simple. It was about the speed at which we were getting the data. The mortgage situation changed swiftly at the end of April when arrears started rising and net margins decreased. The situation was like a roller-coaster as conditions changed rapidly in the mortgage market. We did not have access to this new financial information until the end of May. This is not an excuse, and it will be changed immediately."
But some of B&B's biggest institutional investors, including Standard Life and Legal & General, are furious with the way the rescue was conducted. They argue that the decision to sell a cut-price, 23 per cent stake in the bank to the US private equity firm is a breach of one of the basic rules of City fundraising. Usually, all existing shareholders are offered first refusal to take up shares.
One investor said: "We don't like the idea that a deal was stitched together in a smoke-filled room last weekend without any other potential parties being offered the chance to participate."
Peter Montagnon, of the Association of British Insurers, said: "We are worried that a bad precedent has been set here. But I also understand that this was a complicated situation."
B&B dropped its original £300m rights issue at 82p – it's now at 55p – when it became clear that the bank's profits would be hit by the impact of the worsening credit crunch and mortgage uptake. Both underwriters, Citibank and UBS, have made it clear that they only withdrew from the original rights issue when presented with new financial data.
But Mr Kent said that once the board had the new numbers they moved with "awesome" speed to create the rescue package.