Northern Rock Studying Dividend Payout: FT


Troubled British mortgage lender Northern Rock has taken legal advice about whether to pay out a 59 million-pound (US$119 million) dividend to shareholders, the Financial Times said on Monday.    

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

Northern Rock said on Sunday night it planned to go ahead with a dividend payment to shareholders after the lender had previously acknowledged that it is not legally obliged to do so, the newspaper reported.

The payout is especially sensitive because Northern Rock has been forced to borrow 3 billion pounds from the Bank of England over the past week following a run on deposits.

It was the first run on a British bank for nearly 140 years.

The dividend payment is likely to provoke criticism in the light of the sums lent and underwritten by the taxpayer, the FT said.

Shareholders must be on the share register by September 28 to receive the 14.2 pence dividend on October 26.

However, if the bank were to decide not to pay the dividend, it would be expected to notify shareholders of that fact before September 28, said the newspaper.

Otherwise investors could effectively be buying stock in anticipation of a dividend that would then not materialize, it said.

The FT said Northern Rock would not comment on the issue on Sunday other than to confirm that it still planned to make a payment.