Northern Rock defers investor payments
NORTHERN Rock is putting off some payments to investors because it has less capital than the minimum amount it needs to meet regulations.
The Newcastle-based Government-owned bank, which lost £724.2m in the first six months of this year, says it is deferring payment if all its subordinated debt coupons until further notice.
A Rock spokesman said the move had no bearing on the bank’s ordinary day-to-day customers and would only affect large institutional investors.
He refused to reveal how much money the deferred payments involved and was unable to give a date when the payments would start again.
The bank is legally entitled to defer these payments and the spokesman said investors were aware that the deferrals could be made when they bought the subordinated debt coupons.
The Rock is waiting for European approval for state aid from the Government to bring it back within the minimum capital requirements.
Once the nod is given - expected to be in the autumn - it intends to split the bank into AssetCo and BankCo. BankCo will look after new mortgage lending while AssetCo will be responsible for the existing mortgages and the Government loan.
The restructure is set to be completed by the end of the year, freeing up the Government to sell the bank.
The Rock, which owes £14.5bn to the taxpayer, was at the centre of the first bank run in 140 years in September 2007.
It needed £26.9bn in emergency funding from the Bank of England and was nationalised when sale attempts fell through.
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