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Northern Rock May Find Better Buyer with Citigroup Loan

A loan from Citigroup would allow beleaguered British mortgage lender Northern Rock time to find a suitable investor, instead of nearly giving away its assets on a first come, first served basis, analysts said Monday.

Customers line up to enter a Northern Rock branch in Bromley, in south-east London, 14 September 2007.
AFP
Customers line up to enter a Northern Rock branch in Bromley, in south-east London, 14 September 2007.

Various newspaper reports said at the weekend that Citigroup , which together with Merrill Lynchwas appointed adviser to Northern Rock last week, may lend the bank as much as 10 billion pounds ($20 billion) either to help the bank stay independent or to finance a deal.

This funding would be more attractive than emergency lending from the Bank of England, which carries a penalty rate.

"It's going to allow the amount of time to find a proper buyer for Northern Rock. Right now, they are looking for the fastest buyer," Ralph Silva, senior research analyst at Towergroup, told "Worldwide Exchange."

Despite its losses and its name tainted by the sight of depositors lining up in front of its branches to take their money to safety at the beginning of the credit squeeze, Northern Rock offers an attractive base of assets in the U.K. as it is the country's fifth-largest lender, analysts say.

Chinese banks may be interested in Northern Rock, Silva said,following the example of Minsheng Banking, which will buy 9.9% of San Francisco-based UCBH Holdings for over $200 million in the first strategic investment by a mainland Chinese bank in a U.S. bank.

Several companies have been linked with buying Northern Rock in the past week. The Blackstone Group and Apollo Management are among the latest names on the list, the Wall Street Journal reported on its Web site on Sunday, citing unidentified sources.

Last week, Reuters reported that Northern Rock's advisers were in talks with U.S. buyout firm JC Flowers over a rescue bid and that U.S. firm Cerberus Capital Management was also considering a move.