Northern Rock Borrows 8 Billion Pounds From BoE: FT


Stricken British mortgage lender Northern Rock has borrowed a further 5 billion pounds ($10 billion) from the Bank of England, the Financial Times said on its Web site on Thursday. 

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

The latest borrowing takes Northern Rock's indebtedness to the central bank to close to 8 billion pounds since it was given access to emergency funds nearly two weeks ago, the newspaper said.

It added, without naming its sources, that Northern Rock last week distributed almost 40 million pounds in dividends to holders of preference shares, issued to maintain capital ratios just two days before the bank cancelled its interim dividend to ordinary shareholders, saving about 60 million pounds. 

The Financial Times said Northern Rock had now borrowed the equivalent of a third of its retail deposits at the end of June, raising fresh concerns about its viability.

The bank, hit by the credit crunch in money markets, has been approached by potential buyers for all or part of its business. 

The Financial Times said creditors holding the bank's tier two debt were forming a formal committee to protect their interests in any restructuring or insolvency and had appointed investment bank Houlihan Lokey and the Bingham McCutchen law firm to advise them.

None of the parties mentioned could immediately be reached for comment.