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December 6, 2007 |
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NORTHERN ROCK: Treasury Mulls Nationalization Absent Sale Deal The British government wants interested bidders for Northern Rock plc to submit their offers by the end of the week so their details can be compared to a consortium led by Virgin Group Ltd., the mortgage lender's preferred bidder, Katherine Griffiths and Philip Aldrick write for The Telegraph. Alistair Darling, Britain's Chancellor of the Exchequer, reportedly prefers a private bidder for the troubled bank, a Treasury spokesman told The Telegraph. According to the report, the government and Northern Rock advisers, led by Blackstone and Citigroup, plan to recommend an offer for the bank before Christmas as Parliament goes into recess on Dec. 17 and returns on Jan. 7, 2008. The European Union will convene on Feb. 12 to hear the British government discuss the bank's future and address any state aid issues. The Telegraph says, citing sources privy to the matter, the government will go for nationalization absent any viable commercial deal. The Treasury has instructed parliamentary draftsmen to write a nationalization bill as a fallback option should attempts to sell Northern Rock fail, the Telegraph relates. As reported in the TCR-Europe on Dec. 3, 2007, Mr. Darling asked Northern Rock to consider rival offers aside from the Virgin-led consortium, which includes WL Ross & Co, Toscafund Asset Management LLP and First Eastern Investment Group. Under the Virgin Consortium's indicative proposal, GBP11 billion will be repaid to the Bank of England at completion of the transaction - and the Bank of England will have a clear path towards repayment in full. The Virgin Consortium also proposes that all interest accruing to the Company's financing sources, including under the Bank of England facilities, will be paid in cash rather than rolled-up for payment in due course. U.S. private equity group J.C. Flowers & Co. and Olivant, the boutique private equity firm led by former Abbey National Plc CEO Luqman Arnold, are expected to submit a detailed offer by Friday. The Telegraph notes that negotiations are speeding up because of the deteriorating finances at Northern Rock, which lost GBP200 million a day in deposits two weeks ago. About Northern Rock plc Headquartered in Newcastle upon Tyne, England, Northern Rock plc -- http://www.northernrock.co.uk/mortgages -- is currently the 5th largest UK mortgage lender, the largest financial institution based in the North East of England and one of the most cost efficient UK mortgage lenders based on key performance ratios. The company had more than US$200 billion in assets at the end of June 2007. * * * As reported in the TCR-Europe on Sept. 28, 2007, Standard & Poor's Ratings Services placed its 'A-/A-1' counterparty credit ratings on U.K. bank Northern Rock PLC on CreditWatch with developing implications. At the same time, the 'BBB' subordinated, 'BB' junior subordinated, and 'A-' senior unsecured debt ratings were placed on CreditWatch with developing implications. |
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