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| Version 2 | Version 3 |
|---|---|
| Rock sells off £2.2bn mortgages | Rock sells off £2.2bn mortgages |
| (about 6 hours later) | |
| Northern Rock has agreed to sell £2.2bn, or 2%, of its mortgage assets to US investment bank JP Morgan. | Northern Rock has agreed to sell £2.2bn, or 2%, of its mortgage assets to US investment bank JP Morgan. |
| The troubled lender said it would use the funds to reduce the more than £25bn of emergency loans it has been given by the Bank of England. | The troubled lender said it would use the funds to reduce the more than £25bn of emergency loans it has been given by the Bank of England. |
| Northern Rock said the price JP Morgan was paying represented a 2.25% premium over the value of the assets. | Northern Rock said the price JP Morgan was paying represented a 2.25% premium over the value of the assets. |
| The lender first needed a loan from the Bank of England in September last year because of a global credit squeeze. | The lender first needed a loan from the Bank of England in September last year because of a global credit squeeze. |
| Looking for buyers | Looking for buyers |
| Northern Rock is up for sale. The two leading potential buyers are Richard Branson's Virgin Group and investment fund Olivant. | Northern Rock is up for sale. The two leading potential buyers are Richard Branson's Virgin Group and investment fund Olivant. |
| What is perhaps more important in a symbolic sense, the Rock does not appear to have received a fire-sale price Read Robert Peston's blog | What is perhaps more important in a symbolic sense, the Rock does not appear to have received a fire-sale price Read Robert Peston's blog |
| Some analysts say the credit squeeze may make it difficult and expensive for a private buyer to borrow the funds needed to fund the deal. | Some analysts say the credit squeeze may make it difficult and expensive for a private buyer to borrow the funds needed to fund the deal. |
| For this reason, nationalisation of the Rock is seen as a real possibility. | For this reason, nationalisation of the Rock is seen as a real possibility. |
| Northern Rock also said that its pension fund now has a £100m deficit. This would have to be taken on by any buyer. | Northern Rock also said that its pension fund now has a £100m deficit. This would have to be taken on by any buyer. |
| It has also transferred funds from its final salary pension scheme from shares into more conservative investments, such as government bonds and cash deposits. | It has also transferred funds from its final salary pension scheme from shares into more conservative investments, such as government bonds and cash deposits. |
| Symbolic | Symbolic |
| BBC Business Editor Robert Peston said that Northern Rock's mortgage sale "may not be huge progress, but at least the trend is in the right direction". | BBC Business Editor Robert Peston said that Northern Rock's mortgage sale "may not be huge progress, but at least the trend is in the right direction". |
| "And, what is perhaps more important in a symbolic sense, the Rock does not appear to have received a fire-sale price." | "And, what is perhaps more important in a symbolic sense, the Rock does not appear to have received a fire-sale price." |
| Our correspondent revealed that the Bank of England, and therefore the Treasury and taxpayers, have already incurred a notional loss on one element of its exposure to Northern Rock. | Our correspondent revealed that the Bank of England, and therefore the Treasury and taxpayers, have already incurred a notional loss on one element of its exposure to Northern Rock. |
| The so-called premium on the interest payable on the Rock's loans from the Bank of England is being rolled up into subordinated debt rather than being paid in cash. | The so-called premium on the interest payable on the Rock's loans from the Bank of England is being rolled up into subordinated debt rather than being paid in cash. |
| This subordinated debt now has a market price of 65 pence in the pound, implying that the government is incurring a 35p loss on every pound of subordinated debt it receives from the Rock. | This subordinated debt now has a market price of 65 pence in the pound, implying that the government is incurring a 35p loss on every pound of subordinated debt it receives from the Rock. |