Northern Rock shares jump after rescue plans unveiled
Shares in crisis-hit Northern Rock jumped today after one of the City’s foremost bankers unveiled rescue plans for the mortgage lender.
Former Abbey chief executive Luqman Arnold is not making a full offer for the Newcastle-based group, but wants to move quickly to begin a turnaround of the bank with a heavyweight management team.
Northern Rock’s shares rose 5% on the news, despite concerns about how Mr Arnold’s team would overcome the lender’s estimated £20 billion-plus (€28.4bn) debt burden since it was forced to seek emergency funding from the Bank of England in September.
Panmure Gordon analyst Sandy Chen praised Mr Arnold for doing a “good job in a difficult situation” with Abbey, where he returned the business to profit and sold it to Spain’s Santander in 2004.
But he added: “The one thing they are clear about is that it is not a bid. The bigger question with Northern Rock remains how they address the funding issues.”
It is understood that Mr Arnold’s investment group Olivant would take a minority 15% stake in Northern Rock – worth around £95 million – gaining a return through a recovering share price.
Olivant, which is expected to remove under-fire chief executive Adam Applegarth, has refused to comment on how it plans to deal with the bank’s debts, or on the future of the lender’s 6,000 staff.
Sources said Olivant is convinced speed is critical for a rescue as a full takeover could take months to complete while Northern Rock’s situation worsens.
