Deadline Day For Northern Rock Bids
This Monday, 4th February, marks the deadline set by the government for all interested buyers to make their final offers in the running of the Northern Rock takeover bid.
As it stands, Sir Richard Branson's Virgin Group is thought to be the frontrunner, although is expected to be joined in the bidding by the investment firm Olivant. In addition, the government has expressed its wish for a private sector buyer while the current management at Northern Rock is also considering putting forward a proposal.
Branson, whose Virgin Group has maintained a favourable edge from the start, has stated that they have every intention to meet this Monday's deadline and if successful will create a strong bank guaranteeing taxpayers get all their money back. The £25b in loans, which the Bank of England used to rescue the struggling bank, will be converted into bonds under the sale of Northern Rock to a private buyer and then sold on to investors.
The Northern Rock bank got into financial difficulties last year following the credit crunch due to its incapacity to secure the funds it needed for its mortgage business. Credit was either unavailable or considerably more expensive as a result of the bank being dependent on borrowing funds from the wholesale money markets, instead of the usual method of using savers' deposits.
As soon as the collapse of Northern Rock was reported, once the Bank of England issued the first emergency loan, thousands of savers rushed out to Northern Rock branches up, and down the UK, in a panic-struck attempt to withdraw and rescue their hard-earned savings.
Following a recent report in search of the reasons behind the Northern Rock crisis, the FSA (Financial Services Authority) came under great scrutiny and criticism from the House of Commons' Treasury Committee for what was termed as its "failure of duty in not preventing the bank’s reckless business plan". The senior managers at Northern Rock were also highly criticised and held largely responsible for the bank's collapse.
Today, the government should be announcing the names of the contenders in the Northern Rock bid.
Published on February 4, 2008
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