JC Flowers and a consortium led by British billionaire Richard Branson’s Virgin Group have submitted their bids for troubled UK bank Northern Rock.
A city source said: “JC Flowers has bid to buy the whole thing with £1 billion (€1.4 billion; $2.1 billion) of equity and £15 billion of debt from a consortium of banks.” The JC Flowers bid will repay the Bank of England by 2010, he said. If Flowers succeeds the bank will be led by a heavyweight team with city grandee Paul Myners as chairman.
Richard Branson’s Virgin Group is also leading a consortium, which includes insurer AIG and US distressed debt investor Wilbur Ross.
Someone close to the deal said the firm was looking to inject approximately £1 billion of equity into the company and pay more than £10 billion immediately to the Bank of England. The company will be rebranded under the Virgin banner and the consortium’s funding is underwritten by a group of banks led by RBS, he said.
Alistair Darling said on Monday in the UK House of Commons that he had the power to veto any bid which did not safeguard the more than £20 billion of loans made to the company by the Bank of England. Northern Rock has continued to borrow money from the Bank of England after its funding dried up on the back of the credit crunch.
Northern Rock's share price fell on Monday after revelations that indicative bids received over the weekend were “materially below the market price at the close of business'' on 16 November, according to a statement by the bank. The markets reacted negatively to JC Flowers’ bid, which was the latest to be tabled, falling a further 12.58 percent to £0.85 at 1635 GMT yesterday. The share price was trading 3.3 percent down today at £0.82 at 0919 GMT.
Investment firm Olivant is offering to parachute in a management team, buying a 10 to 20 percent stake, headed by the former chief executive of Swiss bank UBS and Abbey National Luqman Arnold.
Other groups reportedly interested in bidding for the bank include US buyout firms Cerberus, Apollo Management, Thomas H Lee, Dutch bank ING and a consortium led by Welsh businessman Alfred Gooding.