Bradford & Bingley shares plunged last month when it reported pre-tax losses in the first four months of the year.
The Bradford-based lender faces a number of problems
The firm is struggling as the UK mortgage market deteriorates.
To shore up its finances, the lender was hoping to sell a 23% stake to US private equity giant Texas Pacific Group for £179m and asking its shareholders for extra cash.
The TPG deal has fallen through - though City institutions have rallied round to raise the cash.
Why is B&B in the red?
The bank has blamed its problems on "difficult economic conditions" as home-owners struggle to repay loans, particularly regarding buy-to-let mortgages that B&B specialises in.
The value of its buy-to-let mortgages, where borrowers are either more than three months behind with payments or properties have been repossessed increased from £828m at 31 December to £1.1bn at 30 April.
The firm's return on lending is also under pressure because, like all banks, B&B faces higher lending costs due to the credit crunch.
It has also suffered losses on what it calls its "structured finance portfolio" - investments related to the US sub-prime market.
Is B&B the new Northern Rock?
The Bradford-based lender is no Northern Rock.
In its trading statement, it says it can fund itself into 2009 despite problems in money markets.
The £400m it is raising from the city institutions and its shareholders will provide an additional financial cushion.
B&B is by no means alone in trying to raise capital.
Banks worldwide are raising funds in a similar manner to plug losses.
However, there is speculation that the lender could be a takeover target as its shares plunge.
What does this mean for shareholders?
B&B shares have plunged to close to 60p in recent weeks - from yearly highs of more than £4.50.
WHAT IS A RIGHTS ISSUE?
Companies issue extra shares to raise money
They are offered to existing shareholders, usually at a discount to the current share price
Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones
B&B shareholders are being asked to buy new shares at 55p each - down from an earlier price of 82p.
Royal Bank of Scotland has also had a rights issue - which was well subscribed to - while Halifax-owner HBOS is also going to its shareholders for cash.
Who are Texas Pacific and why were they interested in B&B?
Texas Pacific Global, known as TPG, is a global private investment firm with over $30bn worth of investments.
Its first big investment was in Continental Airlines in the early 1990s. It encountered controversy in the UK after its purchase of in-flight catering company Gate Gourmet.
Gate Gourmet fired workers who had walked out in protest at the firm's move to hire seasonal workers.
The dismissals triggered a sympathy strike by British Airways, which caused widespread disruption in 2005.
TPG is regarded as a contrarian investor and has often taken stakes in companies and industries that have fallen out of favour with more mainstream funds.
It was paying a cut price for the stake in B&B but backed away after ratings agency Moody's downgraded the lender's debt.