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29 November 2023

Trio to pitch Northern Rock rescue plans as deadline looms

By Agencies


Billionaire Richard Branson, banker Luqman Arnold and an in-house team will pitch rescue bids for British bank Northern Rock by Monday's deadline, but politics and financial frenzy make a winner hard to predict.


Branson's Virgin Group has been portrayed as the government's preferred bidder yet many shareholders have supported Arnold's investment group Olivant and the in-house proposal has gained credibility in the past month.


All three have resolved to submit proposals by Monday.


A surprise bidder could enter the auction at the last minute, although deepening turbulence in the financial market and the tight deadline make that unlikely.


The decision on who is picked could rest with British Prime Minister Gordon Brown, whose ruling Labour Party has been working on the Northern Rock issue since it came to light in mid-September.


The government is guaranteeing about £25 billion (Dh180bn) of financing available to all bidders, tying it to Northern Rock's fortunes for years to come.


The financing plan is likely to mean all rescuers will implement a low-risk strategy in the coming years, resulting in Northern Rock's mortgage book shrinking and the business stabilising before any more aggressive lending is considered.


Northern Rock's bonds will be guaranteed by the government under a funding plan outlined last month though rival banks are on alert for any unfair advantage it would gain. Rivals could complain if the bank begins competing aggressively again, people in the banking industry have said. (Reuters)