 |
January 14, 2008 |
|
|
|
 |
NORTHERN ROCK: Darling Admits Private Sale May Not Be Possible Alistair Darling, Britain's Chancellor of Exchequer, told a parliament committee last week that a private sale of Northern Rock PLC may not be possible due to the challenging condition of financial markets, Emma Charlton and Laurence Norman write for The Wall Street Journal. "Given the current economic conditions, which are unusual, it is not surprising that a solution that might have been available two or three years ago is not immediately available just now," Mr. Darling was quoted by The Times as saying. "There's plenty of capital around, it's just frozen," he added. Although a private sale of the bank is still his preferred option, the Chancellor conceded for the first time that a sale may not take place by his self-imposed Feb. 29 deadline, The Times relates. "I want to find a private sector solution if that is at all possible. It may not be possible," Mr. Darling was quoted by The Times as saying. "We are reaching a stage where we have to come to a conclusion one way or another." Mr. Darling warned it might not be possible for companies to finance a rescue of Northern Rock, suggesting the British government may be forced to take ownership of the bank, Gonzalo Vina writes for Bloomberg News. WSJ says the government is still hopeful it can recover the estimated GBP25 billion (US$39 billion) it has lent to the troubled mortgage lender from taxpayer loans since September 2007. Two groups that have proposed bids for the stricken bank -- Virgin Group Ltd. and Olivant Advisers Ltd. -- have struggled to raise the necessary financing to secure a deal. Olivant Advisers Ltd., the boutique private equity firm led by former Abbey National Plc CEO Luqman Arnold, plans to inject up to GBP900 million of fresh capital into the bank. The firm's proposal also includes its own management team to rescue the bank. Meanwhile, a consortium composed of Virgin Group Ltd., WL Ross & Co, Toscafund Asset Management LLP and First Eastern Investment Group has proposed a full takeover. Both proposals promise the immediate repayment of about GBP10 billion to the Bank of England. Shareholder EGM As reported in the Troubled Company Reporter-Europe on Jan. 3, 2008, Rab Capital and fellow hedge fund SRM Global, Northern Rock's largest shareholders, have forced a special shareholder meeting tomorrow, Jan. 15, to decide on the bank's future. Reuters says the two hedge funds have tabled resolutions, which if passed, would give shareholders the right to block attempts to: -- sell more than 5 percent of the bank's assets; -- issue 5 percent of new shares; or -- buy any assets. RAB increased its stake in Northern Bank to 7.59%, while SRM hiked its stake in the troubled mortgage lender to 10 percent in December 2007. The British Treasury has instructed parliamentary draftsmen last month to write a nationalization bill as a fallback option should attempts to sell Northern Rock fail, the TCR-Europe said in its previous report. Northern Rock became Britain's most public casualty of the global credit crisis when it was forced to seek emergency funding from the Bank of England in September 2007 after other banks in the wholesale markets refused to extend borrowings, Miles Costello writes for Times Online. Estimated borrowings by the bank to date totals not less than GBP26 billion, the paper adds. About Northern Rock plc Headquartered in Newcastle upon Tyne, England, Northern Rock plc -- http://www.northernrock.co.uk/mortgages/ -- deals with mortgages, savings accounts, loans and insurance. The company also promotes secured loans to its existing mortgage customers. The company had more than US$200 billion in assets at the end of June 2007. * * * As reported in the TCR-Europe on Dec. 20, 2007, Moody's Investors Service downgraded to E+ from D+ Northern Rock's Bank Financial Strength Rating. The E+ maps into a Baseline Credit Assessment of B1. The bank's dated subordinated debt was downgraded to B1 from Baa1 and the undated subordinated debt and Tier-1 securities were downgraded to B3 from Baa1 and Baa3 respectively. All of these ratings have negative outlooks. Northern Rock's short- term rating was affirmed at Prime-1. 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. |
|
|
||
|
Today's Top Stories have been selected from the Troubled Company Reporter - Europe. To receive the Full TCR-EUR please CLICK HERE.
