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Context of 'February 12, 2008: British Government Says Troubled Bank Will Probably Be Nationalized'

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The British Treasury signs Ron Sandler, an experienced banker, to head ailing mortgage giant Northern Rock in the event of its nationalization, according to media reports. [Daily Telegraph, 2/26/2008] Commercial companies are currently finalizing bids in an attempt to keep the bank private, but it will be nationalized the next month and Sandler will be appointed to run it. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Her Majesty’s Treasury, Ron Sandler

Timeline Tags: Global Economic Crises

British Chancellor Alistair Darling announces a plan to sell government-guaranteed bonds worth about £25 billion ($50 billion) to help the sale of stricken mortgage giant Northern Rock to a private investor. The proceeds from the sale of the bonds would be used to pay off emergency loans the bank has taken out from the Bank of England. The British treasury thinks the bonds would speed up a private sale of the troubled lender. Although Northern Rock shares rise by about 42 percent on the news, the bank will be nationalized the next month and the bonds will not be issued. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Alistair Darling, Her Majesty’s Treasury, Northern Rock plc

Timeline Tags: Global Economic Crises

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]

Entity Tags: Northern Rock plc, Virgin Group Ltd

Timeline Tags: Global Economic Crises

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]

Entity Tags: Virgin Group Ltd, Her Majesty’s Treasury, Northern Rock plc

Timeline Tags: Global Economic Crises

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