Northern Rock must wait until after Christmas for salvation
by Richard Kilner
Struggling bank Northern Rock has confessed that its longterm prospects are unlikely to be resolved before Christmas.
Bryan Sanderson, the bank’s chairman, has confirmed that nothing will occur to resolve the firm’s dire financial situation before Christmas. However, he has said that the auction is on schedule and going to plan.
At present the bidding process involves two consortiums. One is led by the Virgin Group, and the other by Olivant, a private equity firm which operates under the leadership of City big hitter Luqman Arnold.
Virgin has been named as the bank’s favoured bidder, though since that declaration worries have surfaced regarding one of its financial backers.
Sanderson has indicated that Northern Rock would carefully consider which deal would be most appropriate and would take the required amount of time to choose.
The difficulty in deciding which offer is best is highlighted by Sanderson’s statement that there are a wide range of people whose interest must be considered. The bank’s shareholders and staff, as well as the taxpayer must be considered.
Northern Rock owes around £25bn to the Bank of England, which amounts to almost £1,000 per taxpayer.
RAB Capital, the bank’s second largest shareholder with a 7% stake, has issued a profits warning, citing the turbulent market conditions as the cause.
Tomorrow Chancellor Alistair Darling will be questioned over his handling of the crisis.
Chris Huhne, one of two Liberal Democrat leadership candidates, has told the government its actions in propping up Northern Rock may break company law.
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