What will happen to Northern Rock?
Luqman Arnold has come up with an “audacious proposal” to parachute a new management team into Northern Rock (NRK), said Richard Fletcher in The Daily Telegraph.
The former Abbey chief executive, who now heads independent investment group Oliphant, wants to take charge in return for a minority stake in the business.
Can it succeed?
Shareholders will be alarmed to note that a leaked sales memorandum for prospective Rock buyers suggests Arnold’s initiative, to “stabilise and grow the Rock as a going concern”, is going nowhere, said Robert Peston on bbc.co.uk. It envisages three options: an outright sale, selling the basic infrastructure, or a sale of infrastructure plus securitised mortgages, leaving a rump of assets and liabilities for run-off. It’s also “embarrassingly clear”, said Jeremy Warner in The Independent, that there is “no contemplated disposal to get the taxpayer off the hook for the £24bn of public money” lent to the Rock.
According to the memo, whatever happens the Bank of England may still be propping up the Rock in 2010, said Jane Croft and Peter Thal Larsen in the FT. It seems no prospective bidder has the money to repay the Bank in the near future. The memo also optimistically assumes that after a plunge to £143m in 2008, profits will rocket to £643m by 2010 – or more than it made in 2006. Rock’s advisers are certainly doing their best to make it seem “an attractive proposition”.
