Northern Rock sells over £2bn assets

by Richard Kilner

Story link: Northern Rock sells over £2bn assets

Struggling bank Northern Rock has announced it has made a move to reduce its enormous debt to the Bank of England (thought to be £25bn in total).

A US investment bank will purchase £2.2bn of Northern Rock’s mortgage assets, with the proceeds being put towards paying back some of the Bank of England loan.

The assets being sold comprise approximately 2% of the bank’s total assets.

The buyer, US banking giant JP Morgan, will pay a £50m premium beyond the assets’ value, which amounts to around 2.25% of their worth.

Northern Rock’s woes began in the latter half of 2007, when the credit crunch created by the US subprime mortgage market landed the bank in severe difficulty.

Since then it has been propped up by a massive Bank of England loan, and the government has been seeking a private buyer, though not ruling out the possibility of nationalisation.

The bank’s share price increased slightly following news of the deal.