Virgin makes second round Northern Rock bid

Published 26th Oct 2011

Virgin Money has put in a second-round bid for Northern Rock, the retail bank which was nationalised after nearly collapsing during the credit crisis, two sources with knowledge of the matter said on Tuesday.

"We have submitted a second round bid," said one source close to the Virgin camp.

Virgin Money, which is part of billionaire Richard Branson's Virgin Group business conglomerate, had already submitted an initial expression of interest in Northern Rock in July.

Its second-round bid contains more detail on its plans for the Northern Rock, although the sources declined to comment on the price which Virgin was considering for Northern Rock.

Virgin Money declined to comment on the situation. Virgin Money shareholder Wilbur Ross had told Reuters on Monday that the company would make a second round bid for Northern Rock on Tuesday.


NORTHERN ROCK, LLOYDS BRANCHES UP FOR GRABS

Northern Rock was fully nationalised three years ago after suffering a run on its deposits during the credit crunch. Chancellor George Osborne said in June that he aimed to find a buyer for it this year.

Aggressive lending practices caused the bank's near collapse in 2007 when credit markets seized up, and Britain had to prop up Northern Rock with 1.4 billion pounds of taxpayers' money during the crisis.

The Northern Rock sale is being handled by the UKFI organisation, which was set up to manage the state's holdings in banks bailed out during the crisis, such as Lloyds and Royal Bank of Scotland (RBS.L), in which Britain finished up with stakes of 40.2 percent and 83 percent.

"This week is when UKFI is looking for further submissions," said one of the sources. A UKFI spokeswoman declined to comment on the matter.

The Northern Rock auction has also coincided with the sale of some 630 Lloyds retail bank branches, which regulators have ordered Lloyds to dispose of as payback for having to be rescued with taxpayers' money during the crisis.

However, both sales have encountered a certain amount of difficulty, with the valuation of the assets hit by the financial market turmoil.

New British bank venture NBNK Investments (NBNK.L) has been competing with Co-Operative Financial Services and Sun Capital for the Lloyds branches, although NBNK has so far been the only one to submit a second-round bid.

NBNK is also weighing up bidding for Northern Rock, sources with direct knowledge of the matter have told Reuters, raising the possibility that it could seek to combine Northern Rock with the Lloyds branches to create a large new UK bank.

Private equity firm JC Flowers has also been linked with Northern Rock, although UK media reports have said that Flowers may pull out of the process. A JC Flowers spokesman declined to comment on the situation.

Northern Rock was Britain's first major bank casualty of the credit crisis. Thousands of customers queued up to pull money out of the bank in September 2007 on concerns over its financial position.

After its near-collapse, Northern Rock was split into a "good bank" comprising new mortgages and savings, and a "bad bank" holding its toxic assets.

The good bank is the part being sold, while the government continues to wind down and run off the bad bank's toxic assets, though these could also be sold to a private party.

Source: ' Reuters '

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