Virgin consortium progresses Northern Rock rescue

by Gill Montia

Story link: Virgin consortium progresses Northern Rock rescue

A consortium led by Virgin Group is working on plans to rescue Northern Rock, the stricken mortgage bank, and is expected to hold discussions with Northern Rock’s board in the coming days.

The bidders, which include Virgin, AIG (the insurer) and Wilbur Ross (the US restructuring specialist), are in the process of compiling a short-list of those who would be considered for the post of Chairman, should the rescue plan succeed.

Sir Brian Pitman, the former chairman of Lloyds TSB, and Peter Ellwood, who has previously been chief executive of Lloyds TSB and chairman of ICI, are understood to be front runners.
James Crosby, former chief executive of HBOS, is another likely candidate.

At the end of last week, the Virgin consortium reported that it was prepared to inject at least £1 billion into the bank in exchange for more than 50% of the equity. It has also pledged to keep Northern Rock independent, as a listed company.

Consortium member AIG is in a position to provide some of the £30 billion of debt finance required to take on the bank’s mortgage book, while Barclays, HSBC, Bank of America and Citigroup are also reported to have approached Virgin to offer debt finance.

A successful takeover by the consortium could result in Virgin Money becoming part of Northern Rock, which is currently being supported by a £13 billion emergency loan from the Bank of England.