TPG Capital, a US private equity group, has dropped out of the bid process for Paragon just weeks after it pulled out of a £179m ($330m) rescue of Bradford & Bingley (B&B).

It is understood that the private equity group decided that Paragon did not “stack up” as a prospective investment and so has not proceeded to the due diligence phase for the UK’s third biggest buy-to-let lender. Paragon ran into serious loan-funding problems and was forced into a £287m emergency rights issue earlier this year. The lender stopped issuing mortgages to new customers although it is renewing existing borrowing facilities for existing landlord clients. Its shares have fallen nearly 90% in this time.

Other private equity houses, including Blackstone of the US and Bridgepoint of the UK, have been examining Paragon’s books in recent weeks but it is not clear when an offer might emerge.