Bidders open talks on Rock
BELEAGUERED mortgage lender Northern Rock today confirmed talks with a number of potential suitors over a possible rescue deal but warned that discussions were at “a very early stage”.
A consortium led by Sir Richard Branson’s Virgin unveiled plans on Friday to bring the Newcastle-based lender into its Virgin Money business, while private equity firms JC Flowers and Cerberus are also said to be interested in the group.
But Northern Rock, which was forced to agree emergency funding from the Bank of England last month after soaring borrowing costs, said there was no certainty over the outcome of the talks.
The UK’s fifth-biggest mortgage lender said the discussions were at a very early stage and the proposals it had received so far were “preliminary in nature”.
It added: “Northern Rock will continue to work with potentially interested parties to understand more fully their preliminary proposals.”
The firm added any deal would have to be assessed by the Bank of England, the Financial Services Authority and the Treasury.
According to City estimates, the firm has borrowed nearly £13bn from the Bank of England since it stepped in as “lender of last resort”, sparking the UK’s first run on a bank in nearly 150 years.
Northern Rock hit problems in the summer because it relied heavily on money markets for its mortgage lending. Since August, banks have become more cautious over lending to each other due to fears of exposure to losses on high-risk US mortgages - sending Northern Rock’s borrowing costs spiralling.
Northern Rock added it would make no further comment on the discussions until it had reached “clarity” over a review of the business, which employs around 6,000 staff.
But tomorrow the company’s chief executive, Adam Applegarth, and chairman Matt Ridley face a grilling from MPs on the Treasury Select Committee over their handling of the crisis.
