Bradford & Bingley defies critics with debt deals

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The Independent Online

Bradford & Bingley will today offer an upbeat assessment of prospects for its funding, saying that a string of successful private-placement deals it has done in the past month show the credit market is moving towards normal conditions.

Britain's biggest buy-to-let lender has tapped its long-term investor base to sell about half a dozen batches of mortgage-backed debt. The bank would normally do a handful of such deals a year, but has moved to plug the gap left by the near closure of the public market for mortgage-backed debt.

Chris Willford, finance director, said that despite analysts' suggestions that B&B's funding could be hit by the global liquidity crisis, the company always had the option of doing more private deals if demand dried up in the public markets.

"The relationships we have built with our investor base over the years have paid off," Mr Willford said, adding that there was demand for more sales.

The deals are so-called reverse enquiry transactions initiated by financial institutions that have money to invest. The key is the strength of the collateral, which is AAA-rated prime mortgages, Mr Willford said.

"It shows investor confidence... it says there are signs the market is gradually coming back."

Bradford & Bingley has been a cause of concern for investors in recent months because it has been more dependent on wholesale markets for its funding than most of Britain's other banks. The drying up of those markets in August nearly led to a collapse at Northern Rock.

Mr Willford said Bradford & Bingley was "proceeding with caution" and did not expect a return soon to the easy credit in public markets of the last few years. "We have been planning this approach since well before the Northern Rock crisis," he added.

Credit Suisse analysts warned last week that B&B could be hit by buy-to-let investors exiting the housing market as price rises tail off and that the drying up of wholesale funding that nearly wiped out Northern Rock could force the bank to rein in its lending. But Bradford & Bingley said it believed its segment of the buy-to-let market will remain active.