Board of Northern Rock revises its proposal

The stand-alone solution proposed by the board of Northern Rock, led by Paul Thompson has revised its proposal for the crisis-torn bank.

Late last night, the board said that it would inject more cash into the bank by selling shares.

The board is competing with the consortium led by Sir Richard Branson’s Virgin Group, which has been the preferred bidder since proposals were submitted on 4 February.

Both bidders have been told to improve the terms of its proposal as the Treasury sees nationalisation of the crisis-torn bank as a better outcome for the taxpayer.

A spokesperson for the stand-alone solution said the board continues to believe that the revised proposal, once implemented in full, will result in an independent, well-capitalised, low cost and low risk mortgage and savings bank.

Yesterday, hedge funds RAB Capital and SRM Global, which together own 19.68% of Northern Rock, are said to be ready to oppose the bid from Virgin Group when it is put to a shareholder vote.

Both RAB and SRM have been building their stakes (RAB to 8.18% yesterday and SRM to 11.5% on Wednesday) and need only a little extra support to reach the 25% they claim could block the Virgin bid.

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.

While Virgin believes its offer is the best choice, the Treasury is still threatening to nationalise the bank, however badly that would hit the credibility of the Government.

Northern Rock became the UK’s biggest casualty of the global credit crunch and has borrowed around £26 billion from the Bank of England since its crisis erupted last September.

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