July 4 (Bloomberg) -- Bradford & Bingley Plc, Britain's biggest lender to landlords, dropped to a record low in London trading after TPG Inc. abandoned a rescue plan to buy a stake in the bank.

Bradford & Bingley fell as much as 15 percent and was down 5.5 pence at 55.5 pence at 11:35 a.m., the lowest since the December 2000 initial public offering. The shares traded 0.5 pence above the rights-offering price in the bank's plan to sell 400 million pounds ($738 million) of stock to investors.

Moody's Investors Service cut its long-term credit rating on Bradford & Bingley to Baa1 from A3, citing ``the substantial deterioration in the bank's asset quality.'' The bank, facing the U.K.'s worst property slump since the early 1990s, said last month that ``difficult economic conditions'' pushed up late mortgage payments. A shareholders group called for the resignation of Chairman Rod Kent, who backed TPG over an alternative proposal.

``Bradford & Bingley has been lurching from one disaster to another,'' said Leigh Goodwin, an analyst at Fox-Pitt, Kelton Ltd. in London who has an ``underperform'' rating on the stock. ``The key question is whether this is Northern Rock in slow motion, and that seems to be speeding up.''

The U.K. nationalized Northern Rock Plc in February after it ran out of funds amid the credit crunch and triggered the first run on a British bank in more than a century. Britain's Financial Services Authority, which acknowledged it didn't properly oversee Northern Rock, said it's working with Bradford and Bingley and its underwriters on the rescue plan.

`All the Players'

``We're talking to all the players involved,'' FSA spokesman Joseph Eyre said today.

TPG exercised a clause to withdraw its offer to buy a 23 percent stake in Bradford & Bingley for 179 million pounds after Moody's cut Bradford & Bingley debt rating, the Fort Worth, Texas- based private equity firm said yesterday in statement.

The downgrade would have increased TPG's costs of financing the deal, forcing the firm to abandon it, said Bruce Packard, an analyst at Pali International Ltd. in London.

``The fact TPG had inserted the clause about a possible downgrade suggests that they knew this might happen,'' Packard said in a note to clients today. ``TPG ought to have factored in some pretty negative arrears and loss scenarios,'' he said.

TPG spokesman Simon Miller declined to comment.

The U.K. Shareholders' Association said it will back the revised rights issue because TPG's departure will mean less dilution for other investors.

`Dead Duck'

``The company is not a total dead duck and we will support the rights issue,'' said Roger Lawson, a spokesman for the association. ``There are still issues about the long term and the chairman will need to step down fairly soon.''

Mike Trippitt, a London-based analyst at Oriel Securities Ltd., cut his rating to ``reduce'' on Bradford & Bingley stock. ``To have any kind of catalyst on these shares, there needs to be a change of management and a change of control,'' he said. ``To have a credit rating downgrade and a strategic investor pulling out is troubling.''

Bradford & Bingley postponed a July 7 meeting to approve the TPG stake and rights offer to mid July. The bank said its largest shareholders support the plan to increase the size of the rights offering from 258 million pounds to 400 million pound after TPG's withdrawal.

Legal & General Group Plc, Standard Life Plc., M&G Investment Managers and Insight Investment Management are some of the large investors that support Bradford & Bingley's revised funding plan, the bank said in a statement today.

`Long-Term Prospects'

``We are positive about the long-term prospects and happy to participate in funding the future of Bradford & Bingley,'' Richard England, a spokesman for Standard Life Investments said today. Standard Life Plc has a 5.1 percent stake in the bank.

Citigroup Inc. and UBS AG remain as underwriters, the bank said. ``While we are disappointed that TPG intends to terminate its subscription agreement, I am pleased that Citi and UBS and our major shareholders continue to support our proposed capital issuance,'' Kent said in the statement.

``Bradford & Bingley continues to be well-funded, and the capital raising will reinforce our position as one of the better capitalised banks and one of the leading mortgage and savings banks in the U.K.,'' Kent said.

Bradford & Bingley cut the price of its rights offering by a third on June 2 to 55 pence a share after disclosing mortgage arrears surged to 2.2 percent at the end of April from 1.6 percent at year end.

Bradford & Bingley is locked into a contract with GMAC LLC to buy 2.1 billion pounds of mortgages through 2009. The quality of these loans is deteriorating at a ``significantly'' rapid rate, Moody's said.

`Extremely Weak'

The U.K. housing slump threatens to tip the economy into recession, and Bank of England Governor Mervyn King says the housing market will be ``extremely weak'' this year.

Clive Cowdery's Resolution Ltd. offered last month to inject 400 million pounds in Bradford & Bingley. Cowdery, who said he had the support of investors including Legal & General Group Plc, HBOS Plc and Prudential Plc, offered to pay 72 pence a share for a 29.9 percent stake.

Resolution spokesman Alex Child-Villiers declined to comment today. Cowdery was considering the investment in Bradford & Bingley as the first step in building ``a new, larger and stronger bank'' through more acquisitions, he said. Resolution withdrew the offer because Bradford & Bingley's board was ``obstructive'' and wouldn't allow access to the bank's books.

Bradford & Bingley rejected Resolution's offer June 27 saying it lacked clarity on ``funding, change of control and price.''

Credit-Default Swaps

Credit-default swaps on Bradford & Bingley rose 75 basis points to 345 as of 8:45 a.m., according to CMA Datavision. A basis point on a contract protecting 10 million euros ($15.7 million) of debt from default for five years is equivalent to 1,000 euros a year.

Credit-default swaps are designed to protect bondholders against default and pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.

-- With reporting by Edward Evans, Ben Livesey and Sabine Pirone in London. Editor: Mike Anderson

To contact the reporter for this story: Poppy Trowbridge in London at ptrowbridge@bloomberg.net; Jon Menon in London at jmenon1@bloomberg.net

Last Updated: July 4, 2008 06:26 EDT