Shares move in Rock saga
TWO of the companies planning rescue bids for Northern Rock are considering keeping a share listing to allow shareholders to benefit from any recovery in the troubled bank’s fortunes.
Both private equity firm JC Flowers and another potential bidder, Virgin, are now thought to have similar plans for the Newcastle-based lender, including a rebranding, continued listing and continuing the business on broadly similar lines as at present.
But Flowers is said to be demanding the Government offers a string of new guarantees before it commits to taking the bank off the taxpayer’s hands.
It is believed the company wants the Government to offer indemnity against the prospect of litigation from shareholders, as well as temporarily underwriting all new mortgages that the group writes during the medium term.
It is also understood to be calling for the Government guarantee on savers’ money, introduced on September 17 to end the run on the bank, to remain in place.
Flowers has already raised £15bn for a potential bid and is thought to have brought Royal Bank of Scotland into a consortium alongside JPMorgan.
The company is also in talks with bankers about possibilities for refinancing the Rock’s £100bn loan book.
Meanwhile, US financial services firm GMAC has been reported as ready to play a key role in the third potential rescue bid, from New York private equity group Cerberus.
Virgin is understood to have held due diligence talks with its partners, who include US insurance giant AIG and hedge fund Tosca, during the past week.
But reports today said Northern Rock could have to cut up to 2,000 jobs after a slowdown in new business.
The firm has said it has no plans for compulsory redundancies, but reports today said it has put in place a recruitment freeze and is trying to agree voluntary departures.
