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Northern Rock rescue deal is some way off

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by Kay Mitchell

Shares in Northern Rock lost nearly 8% on Monday after concerns that a rescue deal may be a long way off. The crisis-torn bank plunged as low as 175.3p at one point before closing at 190p.

Virgin Group, owned by Sir Richard Branson, was looking to take a controlling stake in the bank with the backing of investors in the US and the Middle East. In addition, other suitors are private equity groups, JC Flowers, Cerberus, Blackstone and Apollo.
This week Northern Rock has rejected claims that it is planning to axe jobs but said that recruitment has been frozen.

Matt Ridley quit his position as chairman 2 weeks ago and it was expected that other top executives would step down when in fact the opposite has happened. Chief Executive, Adam Applegate, has resigned from his other role as non-exec director of housebuilder, Persimmon, in order to focus his attention on Northern Rock.

Many shareholders in the bank believe that it can still be rescued without the need for a takeover. However, this is looking more unlikely and with the treasury keen to keep Northern Rock under the control of a financial institution, which leaves Virgin Money out in the cold, it is anticipated that GMAC, an insurance company and bank, is now the forerunner.

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News posted: October 31, 2007

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