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Northern Rock shares plunge on nationalisation fears
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Posted by: forwardone
Northern Rock shares plunge on nationalisation fears
Shares in Northern Rock plunged yet again this morning after Gordon Brown stepped up efforts to prevent his government having to nationalise the troubled bank.
In early trading, Northern Rock shares were down by more than a fifth, losing 15p to 54p. They later recovered slightly to 60.5p. This values the company at below £260m.
Less than a year ago, shares in Northern Rock were changing hands for £12, but the ongoing crisis over its future has left many shareholders sitting on large losses.
There is growing concern that the bank will have to be taken into public ownership if a private buyer cannot be found. Virgin and Olivant, the two companies trying to make arrange a deal, are struggling to arrange funding.
It is understood the prime minister has demanded that investment bankers at Goldman Sachs present all the options on the table by the end of this week.
Speaking after yesterday's extraordinary general meeting, where the board lost one resolution brought by rebel shareholders, Brown said a private sale was only one option.
He told ITV's News at Ten: "There are a number of companies in the financial private sector that have expressed an interest but public ownership - later to move it back into the private sector - is one of the options. The reason we've got to look at everything ... is that the stability of the British economy is the issue."
It is unclear how much would be paid to shareholders in the event of nationalisation. The bank's chairman, Bryan Sanderson, told yesterday's EGM that European law meant they must receive something, but would not speculate further.
Guardian.co.uk
Posted by: forwardone
Virgin would axe jobs at Northern Rock
Sir Richard Branson's Virgin Money has said jobs would be cut at Northern Rock if the group's rescue bid for the stricken lender was successful.
Sir Richard, the frontrunner for the Northern Rock bid, has previously said he was confident a Virgin takeover would not lead to any job cuts.
However, the current boss of Virgin Money, Jayne-Anne Gadhia - who would run Northern Rock should Virgin's bid win - abandoned that commitment this morning.
"We can't continue to make the promise that there will be no redundancies, but we would aim very much to minimise any reductions", Ms Gadhia told BBC Radio 4's Today Programme.
A spokesman for Virgin confirmed that jobs would need to be axed in order to repay the full £25bn of the emergency taxpayer loan within the three years.
It has been reported that as many as 1,000 of Northern Rock's 6,000 workers could lose their jobs, however the Virgin spokesman said he could not confirm numbers.
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He said: "We can't put an exact figure on it, but to pay back the loan within three years we would need to take a more conservative approach."
A more conservative approach could result in Virgin scaling down the size of the group's mortgage book. A smaller volume of mortgages would require fewer staff - such as administrators and underwriters - to service the mortgages.
Yesterday, Sir Brian Pitman, the veteran banker set to become executive chairman of Northern Rock if Virgin's bid succeeds, outlined a more cautious vision than the group's first submission in October.
Sir Brian said he expected the £113bn loan book to shrink, and did not expect deposits to grow this year.
In a separate development, Olivant, which dramatically pulled out of the race for Northern Rock yesterday, may re-enter, according to the Wall Street Journal.
A spokesman for Luqman Arnold, the former boss of Abbey and head of Olivant, told the newspaper it would not rule out a new proposal if it became "commercially viable"
Telgraph.co.uk
Posted by: forwardone
The Prime Minister was today forced to defend his decision to nationalise a high street bank for the first time in the modern era, claiming that the Government had saved investors from losing millions.
As shares in Northern Rock were suspended on the London Stock Exchange - and the threat of legal action by thousands of the company's shareholders loomed - Gordon Brown pledged to his monthly press conference that the Government intended to return the bank to the private sector once market conditions improve.
Flanked by Alistair Darling, the Chancellor, the Prime Minister said that agreeing to guarantee the bank's deposits last year had prevented it from going under, saving investors from losing their savings.
"We will, and always have, put the interests of taxpayers first," Mr Brown said, facing a barrage of questions at Downing Street.
"If we hadn't intervened in August it would have gone under. We ensured an existence for the company. It was the best decision to protect depositors, mortgages holders and employees of Northern Rock."
However, Mr Brown added that he was right to hesitate for several months before nationalising it, claiming that examining all private sector bids - including from Richard Branson's Virgin Money - was the right thing to do, but that no potential investor had provided value for money to the taxpayer.
"Given that both bids that came forward involved a subsidy from Government without an appropriate level of return for taxpayers, after detailed consideration and independent advice, the Chancellor concluded that the right decision is to hold Northern Rock in temporary public ownership, to be run at arms length from the Government under professional management until market conditions change," Mr Brown said.
"The soft option would have been taking the easy road out and putting it into the new private sector bidders. The long-term question was what was the best interests of the taxpayer."
Adding that Northern Rock would be returned to the private sector as soon as possible, but refusing to give any timescale for this to happen, the Prime Minister added: "The option ahead of us is to see the market conditions improve, to see the restructuring of the company take place, and then to get the best deal for the taxpayers. There is no serious opinion out there at the moment which suggests that this is the wrong thing to do."
Mr Darling, who is set to face a rough ride when announcing emergency legislation to the Commons at 3.30pm today, emphasised that Northern Rock would have collapsed had ministers not acted last year to guarantee investors' deposits, stopping a public run on the bank lasting several days.
"This is a bank where, had the Government not intervened ... it would have failed because it had run out of money. We not only have to be fair to shareholders, but also to taxpayers," he said.
In a round of media interviews this morning, Mr Darling insisted that the decision to reject bids from Virgin Money and a management buyout had been taken to protect taxpayers’ interests.
Timesonline.co.uk
Posted by: forwardone
I forgot to mention that the guy who is in charge of running the N.R. for the foreseeable future is going to get paid £90,000 per month. Seems not everyone`s a loser then in all of this.