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Context of 'October 12, 2007: Virgin-Led Consortium Announces Bid for Troubled Bank Northern Rock'

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Mervyn King, governor of the Bank of England, is first alerted to the problems at the troubled British mortgage giant Northern Rock. [Daily Telegraph, 2/26/2008] In a phone call with officials at the Financial Services Authority (FSA) and the Treasury, he is told about the potential impact of the global credit crunch on Northern Rock’s business. [BBC, 8/5/2008]

Entity Tags: Her Majesty’s Treasury, Financial Services Authority, Mervyn King, Northern Rock plc, Bank of England

Timeline Tags: Global Economic Crises

Matt Ridley, a former chairman of the troubled British mortgage giant Northern Rock, asks Governor of the Bank of England Mervyn King about possible support to help Northern Rock overcome a difficult period. In addition, Ridley starts to look for a buyer for the distressed bank. [Daily Telegraph, 2/26/2008]

Entity Tags: Bank of England, Mervyn King, Matthew Ridley

Timeline Tags: Global Economic Crises

British Chancellor Alistair Darling is informed of “quite substantial problems” at the troubled British mortgage giant Northern Rock. The notification comes from Sir Callum McCarthy, chairman of the Financial Services Authority. [Daily Telegraph, 2/26/2008]

Entity Tags: Alistair Darling, Financial Services Authority, Callum McCarthy

Timeline Tags: Global Economic Crises

News of the financial difficulties of troubled British mortgage giant Northern Rock breaks in the British media. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] The BBC reports that Northern Rock’s situation is so bad that it has asked for and been granted emergency financial support from the Bank of England, in the latter’s role as lender of last resort. BBC business editor Robert Peston says Northern Rock is not in danger of going bust and there is no reason for its customers to panic. However, he adds that “the fact it has had to go cap in hand to the Bank is the most tangible sign that the crisis in financial markets is spilling over into businesses that touch most of our lives.” [BBC, 9/13/2007]

Entity Tags: Robert Peston, Northern Rock plc

Timeline Tags: Global Economic Crises

Following a report that troubled British mortgage giant Northern Rock has asked the Bank of England for emergency funding (see September 13, 2007), a run on the bank begins. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] Northern Rock issues a statement confirming the emergency funding and blaming “extreme conditions” on financial markets. The Bank, the British Treasury, and the Financial Services Authority say they believe Northern Rock is solvent and that the standby funding facility will enable it to “fund its operations during the current period of turbulence in financial markets.” However, this does not reassure savers. The share price plunges 32 percent and depositors try to withdraw their savings. Queues form outside a number of branches, the bank’s website collapses, and its phone lines are jammed. Under current British legislation, savings are only protected up to £33,000 ($66,000). [BBC, 8/5/2008]

Entity Tags: Her Majesty’s Treasury, Financial Services Authority, Northern Rock plc, Bank of England

Timeline Tags: Global Economic Crises

The Bank of England tries to find a buyer for the troubled British mortgage lender Northern Rock. It holds talks with Lloyds TSB, another large British bank, about possibly buying Northern Rock, but according to reports, by September 17 these discussions founder. [BBC, 8/5/2008]

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

Timeline Tags: Global Economic Crises

British Chancellor Alistair Darling intervenes in the crisis surrounding the troubled British mortgage giant Northern Rock. A run on the bank began three days ago (see September 14, 2007) and shows no sign of abating, as there are still queues outside a number of branches. Amid a further slide in the company’s share price and fears the run will undermine confidence in the whole banking system, Darling issues a statement saying the Treasury will guarantee all deposits held by Northern Rock. He says savers will not lose a penny and that his action is motivated by the “importance I place on maintaining a stable banking system.” The move appears to work and the queues outside branches will subside the next day. [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

The British Treasury agrees to protect 100 percent of new savings deposited with distressed mortgage giant Northern Rock after September 19. The Treasury had issued a similar guarantee three weeks ago (see September 17, 2007), but that had only covered deposits made up to September 19. [BBC, 8/5/2008]

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

Timeline Tags: Global Economic Crises

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]

Entity Tags: Northern Rock plc, Virgin Group Ltd, Richard Branson

Troubled British mortgage lender Northern Rock names a consortium headed by Sir Richard Branson’s Virgin Group as the preferred bidder to purchase it. The bank is up for sale because it has been hit hard by the credit crisis and requires new funding. The Virgin offer includes the immediate repayment of £11 billion ($22 billion) of the £25bn ($50 billion) Northern Rock has borrowed from the Bank of England to help it through the crisis. The remainder is to be paid over the next three years. RAB Capital, which is the second-largest shareholder in Northern Rock with a stake of about 6.7 percent, says it will oppose the move from Virgin. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Northern Rock plc, RAB Capital plc, Virgin Group Ltd

Timeline Tags: Global Economic Crises

The Olivant group unveils its rescue proposal for the troubled British lender Northern Rock, which is up for sale because of problems it has encountered during the credit crisis. Olivant is led by Luqman Arnold, formerly head of British Abbey bank. The company says it could immediately repay up to £15 billion ($30 billion) of government money that Northern Rock has borrowed to help it through the crisis. However, Olivant will later complain about the negotiating process and will not submit a final bid. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Luqman Arnold, Northern Rock plc, Olivant Ltd

Timeline Tags: Global Economic Crises

SRM Global, a hedge fund that controls 9.9 percent of shares in ailing British bank Northern Rock, warns Chancellor Alistair Darling not to consider nationalizing the bank for less than a fair price. In a letter sent shortly before Christmas, SRM says it has been advised that otherwise there would be a breach of the Human Rights Act and it would have a strong case to pursue ministers through the courts. [BBC, 8/5/2008]

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

Timeline Tags: Global Economic Crises

British Chancellor Alistair Darling tells the Financial Times that he is planning to give the Financial Services Authority (FSA) more power to deal with failing banks to avoid another crisis like the one that has engulfed Northern Rock (see September 14, 2007). He proposes giving the FSA the power to seize and protect customers’ cash if a bank gets into difficulties. [BBC, 8/5/2008]

Entity Tags: Alistair Darling, Her Majesty’s Treasury, Financial Services Authority

Timeline Tags: Global Economic Crises

At a meeting with management, the largest two shareholders in the troubled British mortgage lender Northern Rock—hedge funds RAB Capital and SRM Global—put forward a proposal that will stop the bank’s management negotiating its sale without consent from its shareholders. The bank needs to be sold to a new owner because of problems it has encountered during the credit crisis, and both major shareholders are worried they will not get much for their holdings (see November 26, 2007 and Shortly Before December 25, 2007). However, the bank’s management argues that the proposal should be rejected, as it would make a sale harder, and the other shareholders follow their lead, opening the way for the bank to be sold. [BBC, 8/5/2008]

Entity Tags: SRM Global, RAB Capital plc, Northern Rock plc

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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