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Darling pressured over Rock fate Darling pressured over Rock fate
(about 2 hours later)
Pressure is mounting on Chancellor Alistair Darling over the fate of troubled lender Northern Rock.Pressure is mounting on Chancellor Alistair Darling over the fate of troubled lender Northern Rock.
Two suitors have put forward formal proposals to rescue the bank, which saw its shares collapse after seeking emergency funding from the government.Two suitors have put forward formal proposals to rescue the bank, which saw its shares collapse after seeking emergency funding from the government.
But a binding offer is seen as unlikely to emerge until the Treasury makes clear whether it will extend its £24bn credit lifeline beyond February.But a binding offer is seen as unlikely to emerge until the Treasury makes clear whether it will extend its £24bn credit lifeline beyond February.
Newspapers said Treasury advisers were working on plans to extend the funding.
Mr Darling could detail his views on the bank's future as soon as this week.Mr Darling could detail his views on the bank's future as soon as this week.
He is due to unveil a "statement of principles" that will guide the government's approach to Northern Rock shortly, the Treasury said.
The Sunday Telegraph reported that Mr Darling's advisers are working on plans to allow all or part of the bank's emergency credit line to be extended indefinitely.The Sunday Telegraph reported that Mr Darling's advisers are working on plans to allow all or part of the bank's emergency credit line to be extended indefinitely.
To sidestep European Union rules that block the bank from receiving state rescue aid for over six months, lawyers are drafting documents that will change the status of the funding to restructuring aid, it said.To sidestep European Union rules that block the bank from receiving state rescue aid for over six months, lawyers are drafting documents that will change the status of the funding to restructuring aid, it said.
Although a deal could still be struck by February when the emergency funding is due to be withdrawn, this is by no means certain.Although a deal could still be struck by February when the emergency funding is due to be withdrawn, this is by no means certain.
OptionsOptions
The government has a number of options when it comes to Northern Rock's future - it could let the bank go into receivership, seek a private buyer, or take it over itself.The government has a number of options when it comes to Northern Rock's future - it could let the bank go into receivership, seek a private buyer, or take it over itself.
No deal can be done until Alistair Darling makes up his mind how long he is prepared to sustain the enormous financial support he has provided The BBC's Robert Peston Blog: Darling on RockNo deal can be done until Alistair Darling makes up his mind how long he is prepared to sustain the enormous financial support he has provided The BBC's Robert Peston Blog: Darling on Rock
The Liberal Democrats are calling for the government to take over control of ailing bank, saying that this would be the best way to safeguard taxpayers money loaned to the bank.The Liberal Democrats are calling for the government to take over control of ailing bank, saying that this would be the best way to safeguard taxpayers money loaned to the bank.
Any private buyer would be looking for "a lot of public money", making a government takeover the "least worst" option, said Vince Cable, acting leader of the Liberal Democrats.Any private buyer would be looking for "a lot of public money", making a government takeover the "least worst" option, said Vince Cable, acting leader of the Liberal Democrats.
The Tories are also demanding assurances taxpayers' money is being safeguarded.The Tories are also demanding assurances taxpayers' money is being safeguarded.
But the Treasury has dismissed the idea of the government taking control of the bank at this stage.But the Treasury has dismissed the idea of the government taking control of the bank at this stage.
Shareholder objectionsShareholder objections
Meanwhile, Northern Rock's biggest shareholders said the sale of the bank should be stopped.Meanwhile, Northern Rock's biggest shareholders said the sale of the bank should be stopped.
The Sunday Times reported that RAB Capital and SRM Global, two hedge funds that own for 13% of the bank's shares, argue that forcing a quick sale or break up of the bank would allow Northern Rock to be bought on the cheap.The Sunday Times reported that RAB Capital and SRM Global, two hedge funds that own for 13% of the bank's shares, argue that forcing a quick sale or break up of the bank would allow Northern Rock to be bought on the cheap.
A quick sale would likely take place at well below the company's current share price of 132p, which values the company at £690m.A quick sale would likely take place at well below the company's current share price of 132p, which values the company at £690m.
"If he (the Chancellor) is prepared to leave the financial prop in place for three years - subject to not falling foul of EU state-aid rules - existing shareholders might recoup some of the losses they've incurred," said Robert Peston, the BBC's business editor."If he (the Chancellor) is prepared to leave the financial prop in place for three years - subject to not falling foul of EU state-aid rules - existing shareholders might recoup some of the losses they've incurred," said Robert Peston, the BBC's business editor.
Darling told the Treasury Select Committee in October that February deadline would not be a "drop dead date" for Northern's credit facility but he made it clear that protecting taxpayers, not shareholders, was his top priority. Darling told the Treasury Select Committee in October that the February deadline would not be a "drop dead date" for Northern Rock's credit facility but he made it clear that protecting taxpayers, not shareholders, was his top priority.
ProposalsProposals
Two private investors - a consortium led by Richard Branson's Virgin Group and investment firm Olivant Advisers - confirmed they had made proposals to rescue the bank by a Friday deadline.Two private investors - a consortium led by Richard Branson's Virgin Group and investment firm Olivant Advisers - confirmed they had made proposals to rescue the bank by a Friday deadline.
They both said that they would pay back a significant portion of the bank's borrowings promptly.They both said that they would pay back a significant portion of the bank's borrowings promptly.
US private equity firm JC Flowers is among the 10-odd firms expected to come forward with offers for the Newcastle-based bank, which is responsible for about one in five mortgages in the UK.US private equity firm JC Flowers is among the 10-odd firms expected to come forward with offers for the Newcastle-based bank, which is responsible for about one in five mortgages in the UK.
On Friday, Northern Rock announced its chief executive, Adam Applegarth, was to step down in the New Year.On Friday, Northern Rock announced its chief executive, Adam Applegarth, was to step down in the New Year.
As well as Mr Applegarth, Northern Rock said four non-executive directors, were resigning immediately.As well as Mr Applegarth, Northern Rock said four non-executive directors, were resigning immediately.
At the same time, four board directors were standing down from the board but would stay with the firm.At the same time, four board directors were standing down from the board but would stay with the firm.