Former Abbey chief plans Northern Rock rescue

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Investors have reacted positively to a rescue proposal for Northern Rock as shares in the bank rose 6.8% in early trading today.

Luqman Arnold, the banking expert and City stalwart and former Abbey chief executive, has launched a proposal to rescue Northern Rock as shares in rival UK banks remained under pressure on concerns that major banks in the UK will follow its US counterparts with massive write-offs.

Mr Arnolda��s investment group, Olivant, was set up in 2006 by Mr Arnold and Alan Morgan, a partner at McKinsey, the US consultancy group.

According to sources, Olivant has the support of a dozen blue-chip UK institutional investors and wealthy families.

In a statement, Olivant said the proposal would involve the immediate introduction into Northern Rock of a core team of Olivanta��s experienced principals, led by its chairman, Luqman Arnold, to work intensively alongside its existing Board and management, together with a subscription of a minority stake in Northern Rock, intended to ensure Olivanta��s alignment with the Board and shareholders.

Olivant would subscribe for new shares in Northern Rock up to a 20% stake.

Other suitors expressing an interest in Northern Rock include private-equity groups, JC Flowers, Cerberus, Blackstone and Apollo. A consortium led by Virgin boss, Richard Branson, has also joined a growing list of those expressing an interest in the bank.

However, one of the major concerns for any buyer of Northern Rock is funding for the A?100 billion loan portfolio. The bank has already borrowed nearly A?13 billion from the Bank of England when it had to seek emergency funding.


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