Northern Rock steps closer to nationalisation, with Ron Sandler set to take command
14 January 2008 / by Joy Tibbs
According to reports, it is increasingly likely that failing bank Northern Rock will be nationalised in the next few weeks. The prime minister is to appoint former Lloyd's of London boss, Ron Sandler, as executive chairman if the company is not sold to a private investor.
And, if the Newcastle-based lender is nationalised, the cost to taxpayers is expected to be more than £50 billion; an estimated £1,800 per taxpayer. Its shareholders are to hold an extraordinary general meeting on January 15 at which shareholders vote to decide whether to restrict the board's freedom to sell the bank's assets without consulting them.
The Government maintains that it would prefer to see the bank sold to a private bidder, but the two major consortia in the running – one led by Olivant, the other by Virgin – may not be able to raise the funds needed to pursue a deal. Goldman Sachs, the investment bank chosen to investigate buyer options for Northern Rock, has been given the authority to pursue buyers from Asia and the Middle East.
However, it is thought that the advisor may suggest that the company issues between £12 million and £15 million in bonds underwritten by the Bank of England as one financing option. This course of action may be proposed before tomorrow's shareholder meeting and must be approved by Gordon Brown and Alistair Darling.
If the Government decides to nationalise, it claims it will only be a "temporary move" according to The Telegraph, until it has sold the bank's assets. Mr Sandler has experience dealing with financial crises, having helped struggling insurer Lloyd’s of London recover from serious difficulties in the mid 1990s. He has also worked for money broker Exco and high street bank Natwest. He also worked alongside Gordon Brown while he was Chancellor.
According to Mr Sandler, his role would be "to get things stabilised, to make sure the bank has proper plans in place". Some experts are anticipating that a decision will be made on the bank's future by tomorrow.
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