Number of banks propose to securitise Northern Rock debt

It has emerged that a number of banks have approached the Treasury with a proposal to securitise up to half of the Bank of England’s £25 billion loan to Northern Rock.

The 3 banks, believed to be Barclays, Citigroup and RBS discussed their proposals with the Treasury which is to be an alternative to a scheme devised by the Government’s adviser, Goldman Sachs, to turn all the emergency loans to Northern Rock into bonds to be sold to investors.

There are two bidders for the crisis-torn bank including a consortium led by Sir Richard Branson’s Virgin Group and a stand-alone solution proposed by the board of Northern Rock, led by Paul Thompson.

It is understand that Northern Rock’s largest shareholders, hedge funds RAB Capital and SRM Global have said they would consider legal action if the Treasury accepts Virgin’s offer for the bank. They are in full support of the stand-alone solution.

It was announced last week that the consortium led by Sir Richard Branson’s Virgin Group will shed jobs if it emerges as the preferred bidder for Northern Rock.

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