Chancellor under pressure to decide future of Northern Rock
by Kay Murchie
It was announced late on Monday that Olivant, run by Luqman Arnold, former Abbey chief executive, pulled out of the bidding war for Northern Rock.
This was a huge blow to Chancellor Alistair Darling who is under pressure to decide the future of the crisis-torn bank.
Sources close to the bank said that with just 2 proposals on the table, the Treasury had little reason to delay choosing one of them. If neither bid proves satisfactory, nationalisation is an option for the short-term.
The 2 proposals include 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.
The 2 biggest investors, hedge funds RAB Capital and SRM Global yesterday said they preferred the management plan over the Virgin proposal, which would see their shareholdings massively diluted.
However, other investors are querying what the management can hope to achieve for shareholders.
It is believed the successful bidder will be announced by the end of February. It was originally thought the successful proposal would be announced next Monday, 11 February. However, it is rumoured that Alistair Darling could go back to Luqman Arnold and request that he re-enter the bidding on better terms which would automatically extend the deadline.
Pressure is also mounting for Northern Rock to publish its 2007 results. Last year, these were released on 24 January but this year, a date is yet to be set.
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