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Context of 'February 4, 2008: Two Bidders Submit Offers for Troubled British Lender; Neither Will Be Accepted'

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A consortium led by Sir Richard Branson’s Virgin Group puts forward a proposal to rescue troubled British mortgage lender Northern Rock. Under the plans, Northern Rock would keep its stock market listing, but would be rebranded as Virgin Money. (Daily Telegraph 2/26/2008; BBC 8/5/2008)

Sir Richard Branson’s Virgin Group submits a bid to take over the ailing British mortgage giant Northern Rock. Another bid is submitted by the bank’s own board of directors. These are the only two bids submitted by the deadline, as all the other potential buyers have already dropped out. (Daily Telegraph 2/26/2008; BBC 8/5/2008) Under the terms of its rescue plan, Virgin would inject £1.25 billion (about $2.5 billion) into the bank and take a stake of 55 percent in it. The bank would be rebranded as Virgin Money. Northern Rock’s managers say their proposal—which gained shareholder backing—includes raising at least £500 million (about $1 billion), reducing the assets on the bank’s balance sheet, and reorganizing its operations. The managers criticize Virgin’s bid over the job cuts it entails, although Virgin says they are needed in order to rapidly repay the government money propping the bank up. (BBC 8/5/2008)

The British Treasury says that it does not like either of two bids recently submitted for stricken lender Northern Rock (see February 4, 2008). The bank is being propped up by government loans and could be sold to a private buyer so that the government can get its money back. However, the Treasury is not satisfied with the bids and sees nationalization as a better outcome for the taxpayer. One of the consortia, led by Sir Richard Branson’s Virgin Group, is told that it is the front-runner to take control of the bank. The Treasury urges both Virgin and its rival bidder to offer more. (BBC 8/5/2008)


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