Goldman, N. Rock Close to Financing Package
Goldman Sachs is close to completing a 15 billion pound (US$29.5 billion) financing package to be used by suitors for British lender Northern Rock, the Sunday Times reported, adding details may be unveiled this week.
The paper, quoting no sources, said the deal put together by U.S. investment bank Goldman Sachs was understood to be on better terms than packages being pulled together by rivals including Citigroup and could break the
Northern Rock declined to comment. Goldman Sachs, called upon last month to help put together a financing package, was not immediately available for comment.
Britain's highest profile casualty of the credit crunch is in talks with at least two suitors -- investment group Olivant and preferred bidder Virgin -- and advisers are confident a deal to rescue the bank can be salvaged in January.
But financing worries have loomed over the deal, with fears of a downturn in the UK housing market making it harder to value the bank and its assets. The threat of nationalisation increased last month after the withdrawal of some potential suitors.
Northern Rock is also set to face its investors on Jan. 15. The extraordinary shareholder meeting, called by hedge funds RAB Capital and SRM Global, could hand shareholders the right to vote on whether assets can be sold or new shares issued -- a move the bank says would further complicate a rescue but which the equity investors say will safeguard their rights.
Hedge fund RAB, which has 7.7 percent of Northern Rock shares and is a top investor alongside 10-percent owner SRM, has written to investors urging them to back the EGM resolutions.
"We are concerned that, due to the external pressure the board ... is clearly experiencing, shareholders' views and interests appear overshadowed by political considerations," RAB said in the letter released on Sunday. "Several other shareholders have expressed a reluctance to passively allow the board to decide the future of the company irrespective of shareholders' interests."
Speaking on BBC television, however, Prime Minister Gordon Brown on Sunday said all options remained on the table for the bank, with the option of a private-sector solution still open.
Goldman to Report "Soon"
"We don't rule out any options but the preferable options, as we know, are the private sector bids that are in play at the moment," Brown said, asked if nationalisation was on the cards. "These are in play. They are being looked at very carefully."
Brown said Goldman Sachs, advising the government, would report "very soon".
Northern Rock is estimated to have borrowed just over 26 billion pounds from the Bank of England since mid-September after struggling to raise funds in wholesale markets.
Brown, who has come under fire for his handling of the Northern Rock crisis, said the government had avoided contagion throughout the rest of the economy "so far" and that taxpayers' money was secure.
Northern Rock is not a "lame duck" and its value is far higher than its current share price, its
biggest investor said as it sought backing to prevent a hasty rescue deal.
Hedge fund SRM Global said Northern Rock was "a strong and viable business" and its book value "is materially in excess of its current share price".