The banks and institutional investors underwriting Bradford & Bingley’s third attempt at a rights issue are facing significant losses if the lender’s shares do not rally after a fresh tumble on Tuesday.

B&B’s share price fell to a new low of 35p, down 17 per cent, by Tuesday midday. It had already lost 16 per cent the previous day to close at 42p, compared with the 55p-a-share issue price for the revised £400m cash call.

The fundraising was arranged on Thursday night following the collapse of plans for a smaller rights issue supplemented by a £179m capital injection by TPG Capital, the US private equity group.

A fresh wave of negative broker comment contributed to the fall, with Pali International saying the bank’s shares had no value.

Fears about B&B’s prospects have mounted after Moody’s downgraded the bank’s credit rating last week, providing fresh grounds for TPG to walk away from its investment plan.

Citigroup and UBS are underwriting the entire issue, which will raise £455m in total, including £55m of fees.

However, sub-underwriting brings their combined net exposure down to about £100m, according to people with know-ledge of the rights issue.

Citi has more than two thirds of the net underwriting commitment.

If B&B’s shares do not rise above Monday’s closing price and the two banks are forced to buy the issue, Citi and UBS will jointly be sitting on a paper loss of about £25m.

Four of the bank’s biggest investors – Standard Life Investments, Legal & General, M&G and Insight Investments – have plugged the gap which has been left by TPG.

SLI and L&G have agreed to sub-underwrite about £50m of the issue each while M&G is sub-underwriting close to £25m, and Insight, which is owned by HBOS, less than £20m.

Together, they would suffer paper losses of about £35m if they had to honour their sub-underwriting commitment.

The remainder of the issue has been sub-underwritten by the UK’s commercial banks – Barclays, HBOS, HSBC, Lloyds TSB and the Royal Bank of Scotland – which collectively face potential losses of £50m unless B&B’s share price recovers.

The fees on the cash call, set to be completed in mid-August, have risen from a previous £40m, because of the use of an enlarged rights issue to replace the funds that would have been provided by TPG.

The rights issue fees have been set at 4.75 per cent.

Additional reporting by Peter Thal Larsen and Neil Hume