Thursday 29th November 2007
Virgin Money may become the new owner of Northern Rock, after the troubled bank has named the proposed buyout agreement as its favoured solution to the current liquidity crisis it is undergoing.
In an update to its customers, Northern Rock states that it "wishes to take forward discussions on an accelerated basis" with a consortium formed by Virgin Money to approach the buyout process.
Under the terms of the deal, Northern Rock would technically become the owner of Virgin Money - but would then be rebranded to carry the Virgin Money name.
Some £11 billion of assistance given to the troubled lender by the Bank of England would be repaid immediately, with a promise to refund the remainder of the borrowing over time.
While Virgin Money would be the majority stakeholder in the rebranded business, existing shareholders would retain at least 45 per cent of the company, Northern Rock claims.
"I am grateful for the support that we have had from customers and employees who have stayed loyal to us during these difficult times - and pleased that a solution that firmly restores the companys prospects has been identified," comments Northern Rock chair Bryan Sanderson.
Meanwhile, Virgin Money chair Sir Richard Branson claims that the deal allows shareholders to retain an element of control over the future of the business while eliminating the burden on the taxpayer of repaying the debt to the Bank of England.
In a letter to customers of Northern Rock, he writes: "I have the greatest respect for customers and I hope that you will continue to be a valued customer of our new and exciting bank."
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