Northern Rock seeks management talent for in-house rescue

by Gill Montia

Story link: Northern Rock seeks management talent for in-house rescue

Northern Rock’s management is reported to be planning an internal rescue of the troubled mortgage bank.

Last week, Andy Kuipers’ position as new chief executive was confirmed and according to reports in the press, he is now seeking to strengthen his management team and mount an in-house rescue that could provide an alternative to a buy-out, or nationalisation.

It can be argued that if Olivant and Virgin Group (the current bidders for Northern Rock) can raise financing, then this option is also open to Northern Rock.

However, the plan is only likely to succeed if the bank’s line-up of management talent can impress the financiers behind the Olivant and Virgin bids.

The financing is being led by Citibank and also involves Royal Bank of Scotland and Deutsche Bank.

If the consortium is prepared to back an internal rescue, Northern Rock would go on to raise £1 billion through a rights issue, or placing.

The idea has the support of two of the bank’s biggest investors, hedge fund managers, RAB Capital (6.7%) and SRM Global (9.1%).

Both firms have applied to the Financial Services Authority to increase their individual holdings in Northern Rock above 10%, a necessary step if they are to participate in a rights issue.

RAB and SRM have also been campaigning for the bank to hold an Extraordinary General Meeting and this has now been agreed for January 15th.

Previously both Northern Rock management and the Treasury had hoped to avoid such an event as it will be an opportunity for a public debate between the bank’s two largest investors.

According to Philip Richards at RAB Capital: “We are trying to maintain shareholder rights at a time when we are concerned that political pressure could lead to a deal without shareholders being properly contacted.”