CHANCELLOR Alistair Darling is understood to be working on plans to allow Northern Rock’s rescue loan to be extended to any buyer of the crisis-hit Newcastle bank.
Advisers to the Chancellor are said to be in talks with Brussels officials over ways to continue the Bank of England’s emergency loan without breaking European Union rules on state aid.
Mr Darling may announce as early as this week that any successful bidder can keep the loans already made to stricken Northern Rock, thought to total more than £20bn.
It is believed the announcement will be made in a “statement of principles” set to be outlined by Mr Darling, which will put forward the Government’s hopes for the future of Northern Rock, which has 5,700 staff in the North-East. The Treasury confirmed a statement of principles would be made “within days” but declined to comment on the details.
The Liberal Democrats have called on the Government to nationalise the Rock and demanded that Mr Darling appeared before the House of Commons today to answer questions on the bank’s position.
Northern Rock chief executive Adam Applegarth and a number of non-executive directors announced their resignation late on Friday as the informal deadline for bids passed.
It is thought that as many as eight parties have expressed interest in Northern Rock, although so far only four have gone public with proposals.
They are New York-based private equity firm JC Flowers, Sir Richard Branson’s Virgin Money, Cerberus, another US private equity firm, and Olivant, an investment group headed by former Abbey chief executive Luqman Arnold.
Mr Arnold’s proposals to parachute a heavyweight management team in to turn around the business – a quicker move than a full-blown takeover – has received support from the Northern Rock Shareholders Action Group, which was “favourably impressed“ by the plan.
But the key hurdle for any proposals will be dealing with the huge Bank of England debt racked up by the company. The loans are technically deemed to be rescue aid under EU rules and the regulations are said to block the bank from receiving state aid for longer than six months – giving the group a deadline of February.
The bank sent a business memorandum to 50 potential bidders last week detailing the operation’s likely financial future. It said the bank could still owe £6bn in emergency loan repayments by 2010 – prompting bidders to ask the Treasury whether crippling interest rates of 7% could be waived. It also assured bidders that profits will reach £643m by 2010 – more than the bank made in 2006.