成人论坛

Rock steadier

• Robert Peston
• 28 Nov 07, 04:59 PM

Something remarkable happened after the news was broken by me on the 成人论坛 last Sunday that the consortium led by Virgin had been selected as the preferred bidder for Northern Rock.

The rate at which the Rock's depositors were withdrawing their cash slowed by 75 per cent.

Although the fully fledged run on the Rock ended more than two months ago, many depositors had continued - in a more orderly fashion - to move their cash elsewhere.

The staunching of this outflow was a big thumbs up by one important constituency for the Virgin deal.

But those who own the Rock, its shareholders, were less pleased.

They were miffed that Sir Richard Branson and his chums were offering 拢200m for a business that was worth 拢6bn only a year ago.

And malcontent shareholders have the ability to block the Virgin deal.

It requires approval of 75 per cent of voting shareholders.

With hedge funds controlling well over 15 per cent already signalling that they don't want what they perceive as Virgin's pittance, Sir Richard Branson has a fight on his hands.

Which is why the Rock's board and the Treasury have indicated to me that they are beginning to look almost favourably (almost) on a more shareholder-friendly rescue proposed by , a financial company

Or to put it another way, they are at last supplying info to Olivant which would allow it to turn its idea into a detailed formal proposal.

Olivant's basic plan is simplicity itself. It would inject new senior management into the Rock. It would launch a rights issue of new shares to raise more than 拢500m of new equity capital. And it would allow existing shareholders to retain ownership of most of the Rock.

But what about taxpayers, you shout? How are we going to get our 拢26bn back?

Well the Virgin Consortium's press release for its proposal makes it clear that the jumbo loan it plans to raise from a group of banks led by Royal Bank of Scotland and Citigroup is potentially available to the Rock, even if the Virgin bid flops.

So it should be avallable to a Rock reorganised by Olivant and its boss, Luqman Arnold. Which means that they, like Virgin, could repay 拢11bn of the taxpayer-backed loan from the Bank of England on day one.

Shareholders might yet actually find themselves with a choice of offers. Which won't eliminate the dire capital loss suffered by most of them, but it could reduce the pain a bit.

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