Bank Of England To Bail Out British Bank

[lannarebirth]

As Bob Dylan once said: "You don't need to be a weatherman to know which way the wind blows".

[LaoPo]

Northern Rock Plunges 29%; Bid Could Leave Little For Investors

October 15, 2007

LONDON (Dow Jones) -- Shares in mortgage bank Northern Rock plunged again Monday, losing more than a quarter of their value after reports over the weekend that potential bidders would offer shareholders virtually nothing for their stock.

On Friday, U.K. entrepreneur Richard Branson's Virgin Group announced it had made a non-binding approach to Northern Rock under which it and several partners would inject capital into the business in exchange for making it part of the Virgin Money group.

The Sunday Telegraph newspaper reported that buyout firm J.C. Flower and hedge fund Cerberus had also submitted indications of interest by a Friday afternoon deadline.

Virgin Group didn't reveal a potential bid price, but all three interested groups have indicated to the U.K. government that they would offer almost nothing for the shareholders' equity, the Telegraph reported.

Shares in Northern Rock fell 21% to 216 pence in London, having lost as much as 29% in earlier trading. The shares had rebounded from a low of 112 pence in early October amid hopes for a takeover and reports that several hedge funds had built up a stake in the bank.

On Monday Northern Rock said it's working with a number of potentially interested parties on a variety of proposals.

"Northern Rock notes that this process and the discussions it is having are at a very early stage and that the proposals it has received so far are preliminary in nature," the bank said in a statement.

It added that any deal would have to be approved by the U.K. Treasury, the Financial Services Authority and the Bank of England, which is acting as a lender of last resort to the mortgage bank after the credit crisis left it unable to raise funding on the market.

Northern Rock is so far thought to have borrowed around 13 billion pounds from the central bank.

The Telegraph said the potential bidders would not offer cash to shareholders.

Virgin and its partners -- which include a division of AIG (AIG) as well as investment groups WL Ross & Co., Toscafund Asset Management and First Eastern Investment Group -- would provide cash in exchange for an equity stake at a significant discount to the share price.

Analysts at Credit Suisse said the Virgin consortium approach removes the prospect of shareholders getting absolutely nothing, but it introduces significant downside risk to the share price.

The broker said the consortium would likely want 50% to 75% of Northern Rock in exchange for injecting around 1 billion pounds of capital. That could dilute the net asset value and earnings for current shareholders by around 60%. Credit Suisse cut its price target to 180 pence a share from 390 pence.

"We see no upside, only downside, and would sell the shares," the broker said in a note to clients.

Separately, the Sunday Times reported that Virgin Group has approached several heavyweights from the financial services industry to take over the board of Northern Rock if its bid succeeds.

Names on the shortlist include Brian Pitman, former chairman of Lloyds TSB , Peter Ellwood, previously CEO of Lloyds TSB and James Crosby, former CEO of mortgage bank HBOS , the newspaper said.

http://money.cnn.com/news/newsfeeds/articl...33_FORTUNE5.htm

LaoPo

[the gent]

The notion that the BoE could follow through with an industry wide indemnity is every bit as fanciful as the belief that the current British economy, so hopelessly based on a grossly over valued property market, will not grind its way into recession.

The inevitable bust, postponed since 2005, will claim many more not least those hooked into the sub prime market every bit as significant as the American disaster.

The IMF, forever behind the curve it seems, have finally expressed the scale of the problem in the UK but doubtless the British, possibly the stupidest, most financially illiterate people in the developed world, will continue ostrich like in their ignorance preferring to listen to the blandishments of a morally bankrupt government led by the Bunteresque, Golden Clown.

It will be interesting to see which way NuLabour will jump: to embrace the much vaunted " prudence " of Clown, accept recession and risk political suicide or inflate the pound to oblivion and perhaps stretch another term of office.

[LaoPo]

To Be....or Not to Be......

Branson to rebuild Northern Rock rapidly

DETROIT (Reuters) - A Richard Branson-led consortium bidding to acquire ailing British bank Northern Rock (NRK.L: Quote, Profile, Research) plans to rapidly rebuild it, consortium member Wilbur Ross said on Sunday.

Ross, a billionaire investor known for buying and turning around distressed companies, said he would be a "very major equity investor" in the consortium although he declined to specifically state his stake.

"Branson is not a great one for shrinking things - he's a great one for building things. The idea would be to build it up as rapidly as we could," Ross told the Reuters Autos Summit in Detroit.

Ross said it would be renamed Virgin Money and build its deposit base, after falling into trouble because it had been too dependent on securitizations and commercial paper -- markets which dried up when the subprime crunch hit.

Under the Virgin proposal, the consortium would immediately repay a significant proportion of a loan from the Bank of England (BoE), the consortium has previously said. Ross said the total owed to the Bank of England had been estimated likely to reach 24 billion pounds by the end of the year.

A rival proposal for Northern Rock was put forward by Olivant, a team led by veteran troubleshooter Luqman Arnold, which plans the "prompt repayment" of loans from the BoE and would subscribe for a minority stake in the company.

Ross said he thought any bid for Northern Rock would have to repay a large amount of the money owed to the BoE to succeed. Any deal that did not pay back the funds would probably run into regulatory problems on grounds that the government was subsidizing a bank, he said.

Ross, known for restructurings in the steel, textile and coal industries, is also betting on U.S. mortgages.

He said he had completed the purchase of the loan servicing unit of bankrupt American Home Mortgage Investment Corp (AHMIQ.PK: Quote, Profile, Research) on Friday for about $500 million. He said he aims to double or triple the loan servicing portfolio. The unit is currently handling a little over $40 billion in mortgages.

That expansion could be done without a sizeable increase in overhead or capital expenditure, by buying a series of smaller portfolios, he said.

American Home had been the 10th-largest U.S. mortgage lender before filing

http://www.reuters.com/article/innovationN...r=1&sp=true

LaoPo

[LaoPo]

Northern Rock shares dropped like a stone today, more than 40%...from 104P to 61P at a certain point, recovering now a bit. Still trading, down some 22% now

Northern Rock Declines on Doubts Over Bank's Value

Nov. 20 (Bloomberg) -- Northern Rock Plc, the U.K. bank that was bailed out by the Bank of England in September, fell as much as 39 percent in London trading because the company may fetch less than its current share price in a sale.

The stock declined 32 pence to 72.2 pence at 9:38 a.m., valuing the Newcastle, England-based company at 311.7 million pounds ($643 million).

``We don't really know the value of the bids'' for Northern Rock, said Simon Maughan, an analyst at MF Global Securities in London who has a ``neutral'' rating on the stock.

Bloomberg

LaoPo

[LaoPo]

Northern Rock Receives Bid Below Yesterday's Price

Nov. 21 (Bloomberg) -- Northern Rock Plc, the U.K. mortgage lender bailed out by the Bank of England two months ago, received a bid ``materially below'' yesterday's market value of 409 million pounds ($841 million), casting further doubt on the lender's sale.

Northern Rock fell as much as 20 percent in London trading, the seventh straight decline, and increased this year's plunge to 93 percent. Newcastle, England-based Northern Rock declined 8.5 percent to 88.8 pence at 11:34 a.m. after it reported in a statement today further ``expressions of interest'' from companies seeking to buy or manage the company.

``A lot of people are expecting the existing shareholders to get wiped to zero,'' said Simon Maughan, an analyst at MF Global Securities Ltd. Shareholders will ``want to get actively involved'' in blocking any bid that eliminates the value of their holdings, he said.

Chancellor of the Exchequer Alistair Darling is struggling to find a buyer willing to take on the 25 billion-pound ($51 billion) Bank of England rescue loan.

Northern Rock has received competing proposals from J.C. Flowers & Co., run by former Goldman Sachs Group Inc. banker Christopher Flowers, billionaire Richard Branson's Virgin Group Ltd. and Olivant Advisers Ltd., founded by former Abbey National Plc Chief Executive Officer Luqman Arnold. Cerberus Capital Management LP, a U.S. private-equity firm, also submitted an acquisition plan.

Bid Details

Flowers and Virgin are both proposing about 1 billion pounds in equity recapitalization apiece. Flowers wants to keep the Northern Rock name and repay about 15 billion pounds of the estimated 25 billion pounds debt to the Bank of England. Flowers says central bank funds would be needed through 2010. Virgin would rebrand the bank as Virgin Money and pay about 10 billion pounds of the debt upfront.

Northern Rock is conducting a review of its future after it sought emergency funding from the Bank of England in September to help fund its loans.

``The company is aware that all stakeholders in the company want clarity on the outcome of the strategic review as soon as possible and is therefore progressing the process as quickly as possible,'' Northern Rock said.

The review will be completed no later than February, although it expects to finish it earlier, it said.

http://www.bloomberg.com/apps/news?pid=206...&refer=news

All-in-All the subprime crisis hurts the UK bad and the once glorious Northern Rock is worth less and less...

LaoPo

[JimsKnight]

Virgin Money, it has a certain ring to it does it not?

I reckon the buy-out will happen sooner rather than later.

[cclub75]

Last news from Northern Rock, the so called "safest bank in the world" (the OP who wrote this famous sentence will be in history books soon).

Fresh doubts emerged last night about Northern Rock's ability to repay the £23bn of taxpayers' money it has been lent by the Bank of England.

A Guardian examination of Northern Rock's books has found that £53bn of mortgages - over 70% of its mortgage portfolio - is not owned by the beleaguered bank, but by a separate offshore company.

Read the rest of the article (Guardian)... it's absolutly mind boggling, especially the part about their lending practises...

Edited November 24, 2007 by cclub75

[cclub75]

Gimme more.

The circus continues.

Further 574 millions USD evaporated from Northern Rock... because of the credit crisis (Reuters)

[LaoPo]

The Northern Rock drama continues...

From Jan 16, 2007 >> Jan 15, 2008 the share dropped -94.04% (so far, still trading) and dropped -15% today, still trading.

The stock is dead cheap* at a P/E of 0,74....almost for free.

* and dead risky.

Rock shareholders' revolt fails

Northern Rock shareholders have largely voted to reject plans that could have limited management powers to find a rescue deal for the business.

story here:

http://newsvote.bbc.co.uk/2/hi/business/7189991.stm

LaoPo

[cclub75]

The Northern Rock drama continues...

... And eventually, the stupid english taxpayers/voters will pay. Thank you. And with a large smile please.

Viva la nationalization !

Ah I love this thread... "Northern Rock, the safest bank in the world"... You remember ?

It's the biggest heist of all times (well, soon in USA, they're going to explode the record...)

Enron was a mere toy for children...

[lannarebirth]

Northern Rock to be nationalized

U.K. Treasury chief said Sunday the troubled mortgage lender will be nationalized after the government rejected two takeover bids.

LONDON (AP) -- LONDON (AP) -- Treasury chief Alistair Darling said Sunday that struggling bank Northern Rock PLC will be nationalized after the government rejected two private takeover bids

http://money.cnn.com/2008/02/17/news/inter...dex.htm?cnn=yes

[cclub75]

U.K. Treasury chief said Sunday the troubled mortgage lender will be nationalized after the government rejected two takeover bids.

Spot on. I wrote it... on january 16.

So yes indeed, we can say now, officially, that the british tax payers will... pay the bill.

Thank you Alistair.

Again, it's the biggest heist of all times.

Shame.

As for the official reason "the gvt rejected 2 takeover bids" it's of course utter bullshit. The faith of this "bank" was decided long time ago, after the august crisis. Richard Branson bid was... just to entertain the financial markets for a while and offer a face saving operation to the british gvt.

Shame, shame.

Edited February 17, 2008 by cclub75

[GuestHouse]

U.K. Treasury chief said Sunday the troubled mortgage lender will be nationalized after the government rejected two takeover bids.

Spot on. I wrote it... on january 16.

So yes indeed, we can say now, officially, that the british tax payers will... pay the bill.

Thank you Alistair.

Again, it's the biggest heist of all times.

Shame.

As for the official reason "the gvt rejected 2 takeover bids" it's of course utter bullshit. The faith of this "bank" was decided long time ago, after the august crisis. Richard Branson bid was... just to entertain the financial markets for a while and offer a face saving operation to the british gvt.

Shame, shame.

Seems fair to me - It is after all the British Tax payer who has profited so much these past years from lax lending by all mortgage lenders and the subsequent boom in house prices that created.

A boom that I suspect has financed to move of many a TV member to Thailand.

[A_Traveller]

This decision is no surprise, as I noted at the time, the political implications were and are critical given NR's foci, {Labour Party heartland}. By the by since no depositor lost any funds and assuming this nationalisation {which is being bracketed as a temporary measure} goes ahead, then, as I noted originally, from a depositor's viewpoint it was indeed 'the safest bank in the word'. I still take the view that this was fore-mostly a technical matter, which should have been managed by the BoE, I found Mervyn's lamentations late last year unconvincing, though it did bring to mind his old nickname, Merv the swerve.

Regards

/edit clarification//

Edited February 17, 2008 by A_Traveller

[A_Traveller]

By the by last weekend, the G7 finance ministers mentioned, sotto voce, that there could be $400bn of losses in the financial system linked to US subprime mortgages. So far though only $120bn have been clearly identified. American International Group's statement, last Monday revealed where some more of the losses were hiding. In December, the US insurer announced a $1.05bn to $1.15bn charge for October and November for credit default swap (CDS) insurance it wrote against collateralised debt obligations.

Now, alongside PwC’s conclusion that AIG had a ‘material weakness’ in its reporting, that charge has been increased to $4.9bn. That is largely the result of a change in methodology. Last time AIG did not mark its exposure to where the cash bonds were trading, instead it made an adjustment based on where it believed the CDS should trade. Now, it has effectively acknowledged that the quality of the market data on the CDS is insufficient for this purpose, so it has reverted to the traditional method of pricing off the cash bonds. It should be noted that the AIG numbers are only marked as at November 30.

Regards

PS One question no one either knows the answer to or is willing to speculate [too loudly} is what happens if this confidence crisis, starts to really infect other areas within the financial system, such as longer term securities. There's some FUD in that arena presently, for example, though it's interesting that Credit Suisse's Chief Executive Brady Dougan said over this weekend that it could only take 3 - 5 months before the crisis bottomed out, believing that he already detected easing of tension within liquidity and credit provision, though acknowledging that CS was preparing for the possibility that the crisis would continue for some time.

Edited February 17, 2008 by A_Traveller

[anaorak]

Bradford and Bingley are now down nearly 20%.

Next week Alliance and Leicester and the week after RBS will announce their finals.

So, Banking Sector is not lookng good!

Might be safer to put your money in Thai banks, but I wonder if they have sub-prime debt that is being covered up.

[EXS]

As i understand by Wednesday us UK taxpayers will be into the Rock for £110 billion!

[GuestHouse]

Might be safer to put your money in Thai banks, but I wonder if they have sub-prime debt that is being covered up.

You can bet they've got plenty to cover up and are doing just that.

[cclub75]

... the "temporary" nationalization... has just taken a "few years" now. In less than 24 hours.

``We are clearly talking about a period of some years,'' Ron Sandler, who was appointed by the Treasury to lead the bank, said at a press conference today in Newcastle, England.

The amount of the heist (to this date) is... 55 billions GPB ! 107 billions USD !

At least, some politicians still have some common sense and are able to qualify the situation.

``Let's be in no doubt about what a disaster this day is,'' said David Cameron, leader of opposition Conservative Party. ``The nationalization of Northern Rock is a disaster for the British taxpayer, a disaster for this Government and a disaster for our country.''

(Bloomberg)

[LivinLOS]

Just another symptom of the debt is money sickness that will someday fall apart. Rewarding / saving the speculators at the expense of the prudent non gamblers. Same as PPT holding markets up, laws designed to create an entire nation of speculators in equity markets via pension investment schemes and tax breaks on speculation.

these events will one day been seen for the madness they are. Tho I have no faith we will realize this even in my lifetime.