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January 14, 2008 |
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NORTHERN ROCK: Ron Sandler to Lead Bank If Nationalized The British Treasury has tapped Ron Sandler, a senior banker and former adviser to prime minister Gordon Brown, to lead Northern Rock PLC in the event the mortgage lender is taken into public ownership, published reports say. According to The Guardian, Treasury officials were lining up other executives and advisers in case the government opted to nationalize the stricken bank. The news came ahead of an extraordinary meeting of general meeting scheduled tomorrow, Jan. 15. The appointment, the Associated Press says, fuels mounting speculation that the government will nationalize the bank. Analysts suggests that the failure to find a buyer or a viable long-term solution for the bank's woes showed that the government and the Northern Rock board were running out of options, The Guardian relates. 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 reports citing the Telegraph as its source. 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. Private Sale Northern Rock is considering two proposals from a consortium of interested bidders. 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 Meeting 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 the special shareholder meeting 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. The shareholders fear the board is tempted to sell the lender and its GBP110 billion of mortgages "on the cheap" to a consortium led by Sir Richard Branson's Virgin Group, The Guardian relates. 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. 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. |
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