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February 6, 2008

Olivant unlikely to rejoin bidding for Northern Rock

by Richard Kilner

Story link: Olivant unlikely to rejoin bidding for Northern Rock

Olivant, the group led by Luqman Arnold which pulled out of the bidding for struggling bank Northern Rock on Monday, appear unlikely to rejoin the race for the beleaguered bank if industry insiders are right.

Luqman Arnold is well-known as a city big hitter, and the last minute withdrawal of his group from the bidding came as a complete surprise.

With Olivant out of the race only two contenders remain: Richard Branson’s Virgin, and an internal bid from Northern Rock itself.

Should neither Virgin nor the internal bid prove successful the government has retained the option of nationalising the bank, though a private sector solution remains their preferred course of action.

It had been speculated that Olivant could return to the bidding, but this now appears highly unlikely.

The bone of contention which has led to the group’s withdrawal and which seems to prevent Olivant bidding again is that the government is insisting that the bonds issued as part of the deal would be backed by the Treasury for just three years.

City insiders believe that the Treasury is now concentrating on the Virgin and internal bids, rather than trying to persuade Olivant to make a new offer.

Under Virgin’s plans the bank would be rebranded Virgin Money, and capital of £1.25bn would be invested, more than is proposed by the internal bid.

However, the internal bid does have the backing of major shareholder hedge funds SRM Global and Rab Capital.

 

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Related stories to: Olivant unlikely to rejoin bidding for Northern Rock

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Virgin loses “preferred” status in Northern Rock sale  ...

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