David Bonderman, the chief executive of TPG, was personally given a 15-minute ultimatum by the City’s chief regulator to back Bradford & Bingley or pull out, The Times has learnt.

Details of the dramatic telephone conversation on Thursday night between the private equity firm’s boss and Hector Sants, chief executive of the Financial Services Authority, emerged yesterday as the City surveyed the wreckage of the TPG deal.

After a series of increasingly fraught telephone calls, Mr Sants insisted that Mr Bonderman make up his mind in the next 15 minutes after TPG indicated that it was considering pulling out of the rescue deal. Mr Sants was concerned about the risk of depositor panic yesterday morning if it was reported that a third capital-raising plan for the beleaguered bank was unravelling. He insisted that there had to be certainty and demanded an immediate decision from Mr Bonderman.

The FSA chief already had an alternative plan ready to go in the form of rescue backing promised by four investment houses: Prudential, Legal & General, the HBOS-owned Insight and Standard Life.

At 10pm Mr Bonderman told B&B and the FSA that he was pulling out. A clause in the original deal allowed him to do so if B&B’s credit rating was downgraded twice by Moody’s, which it had been earlier on Thursday night.

The four rescuing investors were facing immediate losses yesterday as the accident-prone bank’s shares plummeted by 18 per cent to 50p – well below its 55p rights issue price.

B&B said that an enlarged £400 million rights issue would go ahead at an unchanged price of 55p and was supported by the four investors. It is thought that the four had provisionally agreed to sub-underwrite the £179 million portion of the equity previously earmarked for TPG.

Six of Britain’s biggest clearing banks – Abbey, HBOS, HSBC, Royal Bank of Scotland, Barclays and Lloyds TSB – are also understood to have agreed to take some of the sub-underwriting.

Citigroup and UBS remain the lead underwriters. Under a new underwriting agreement, they are said to be fully committed and unable to use rating agency downgrades to get off the hook.

Rod Kent, B&B’s executive chairman, said: “Whilst 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.”

The stunning withdrawal by TPG means that B&B’s capital-raising agonies will be prolonged by another two weeks and it will get the £400 million only at the end of August. The extraordinary meeting to approve the old capital-raising, scheduled for Monday, will be adjourned until the week beginning July 14.

TPG is thought to have been concerned not only by the Moody’s downgrade but also by increasingly worrying signals from the British mortgage market. B&B is a big player in buy-to-let home loans and in self-certified mortgages, loans where borrowers do not have to give evidence of their income.

B&B said last night that investors would be offered 67 new shares for every 50 that they own.

Times Recommends

• Lenders face huge hit on mortgage fraud
• Mortgage rescue fund at the ready
• Zoom airline collapses and halts all flights