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Olivant pulls out of Northern Rock rescue

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by Kay Mitchell

Yesterday saw the deadline for bidders for Northern Rock to come forward with rescue proposals.

However, Olivant, run by Luqman Arnold, former Abbey chief executive pulled out of the bidding war late yesterday. The group said it was unable to come up with a proposal which could meet its investment requirements as well as the Government’s financing terms and the interests of Northern Rock stakeholders.

Consequently, the crisis-torn bank now has just two proposals, a consortium led by Sir Richard Branson’s Virgin Group and a stand-alone solution proposed by the board of Northern Rock.

Virgin is proposing that the company remains a listed entity but it would be re-branded as Virgin Bank. Sir Brian Pitman, proposed executive chairman of Virgin Bank, said we have made a proposal that seeks to stabilise the company and rebuild it as a trusted and thriving institution under the Virgin brand with a long-term future.

The stand-alone solution would see Paul Thompson, a former investment banker, put in as chief executive.

Mr Thompson has been spending time seeking support from investors to support a rights issue. Shareholders have indicated they will help him raise £400 million, however, this does not include any help from the bank’s 2 biggest investors – hedge funds RAB Capital and SRM Global.

The Government needs to decide on the bank’s future by the end of February so it can then approach the European Commission to seek approval for any rescue deal by 17 March (the cut-off date for the current £55 billion of financial help given to Northern Rock from the Bank of England).

Nationalisation is an option and is not being ruled out by Chancellor Alistair Darling.

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News posted: February 5, 2008

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