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Virgin eyes takeover as Northern Rock debt escalates

12 October 2007
Reports indicate that billionaire Richard Branson's holding company Virgin Group Ltd. is in talks with troubled bank Northern Rock, and speculation about a possible takeover has led to an instant increase in Northern Rock share prices.

The Newcastle-based company is now estimated to owe approximately £12.9 billion in emergency loans, having increased borrowings by £2.3 billion over a seven-day period.

And the revelation that Alistair Darling holds a Northern Rock mortgage has done nothing to restore consumer confidence or to appease those questioning whether taxpayers’ money should have been laid on the line to bail the lender out if the Government’s Bank of England guarantee comes into force.

Concerns that Northern Rock’s debt is spiralling out of control are rife, and people appear increasingly reluctant to use its services. Indeed, Fair Investment Company’s website recorded a 41 per cent decrease in customer enquiries for its products in October to date compared with adjusted figures for September.

News that the company’s charity subsidiary, the Northern Rock Foundation, is to scale down planned donations as a result of the bank’s current difficulties are unsurprising. However, the foundation has pointed out that the sale of Northern Rock at a low price could be extremely detrimental in terms of donations as it has a 15 per cent stake in the company.

However, several potential takeover bids are on the cards, and the share price increase suggests that investors see a buyout as the key to regaining the public’s confidence. Earlier reports indicated that New-York based private equity company firm JC Flowers & Co. and Cerberus Capital Management have also shown interest in acquiring the company.

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