Why is Virgin best for the Rock?
Updated on 26 November 2007
A consortium headed by Sir Richard Branson's Virgin Group has been confirmed as the preferred bidder for the troubled mortgage lender Northern
Channel 4 News online explains the details of the bid.
How much will Virgin pay?
Virgin will repay £11bn of Northern Rock's £25bn loan from the Bank of England at completion of the transaction. The BoE will also be given a "clear path" towards repayment in full, which is expected to depend on the continued support of the taxpayer for two to three years.
Virgin will also put £1.3bn of new cash into Northern Rock, while the Virgin Money business will be injected into the bank. Half of the money will come from the consortium, with the remainder being raised through an offer to existing Northern Rock shareholders, buying new shares for 25p each, less than a third of the current share price.
Who makes up the Virgin-led consortium?
Virgin would be the controlling stakeholder, joined in the consortium by New York investors WL Ross & Co, hedge fund Toscafund Asset Management and Hong Kong-based finance house First Eastern Investment Group.
What stake would the consortium hold?
The Virgin consortium will hold no more than 55 per cent of the company once the transaction has been concluded.
Will Northern Rock change?
Northern Rock will be re-branded Virgin, but its stock market listing will be retained and the company will continue as a going concern without any break-up of the business.
Who will be in charge?
A new management team would be appointed, headed by former Lloyds TSB chairman and chief executive Sir Brian Pitman as chairman.
Virgin Money chief executive Jayne-Anne Gadhia would take on the post of chief executive.
What about its employees?
There are no current plans to reduce staff numbers at Northern Rock and the business will continue to be run from Newcastle and in the North East of England.
What does the government say?
The government is expected to make it clear that the alternative to Virgin's bid would be for Northern Rock to go into administration under insolvency procedures, which could leave investors with nothing.
What does Northern Rock say?
Chief executive Philip Richards said: "It would be totally inexcusable for this government to deliberately force this bank into administration."
Bryan Sanderson, chairman of Northern Rock, said the Virgin bid was "very good news for Northern Rock".
What do the shareholders say?
About 100,000 of Northern Rock's small shareholders wrote to Mr Sanderson yesterday to express concerns that directors were planning a "fire sale" of assets and calling for an extraordinary general meeting.
They wrote: "We very much deprecate the driving down of the share price to meet expectations about future price, which seems to favour the interests of some potential bidders above existing shareholders."
Meanwhile, the biggest declared shareholder, hedge fund RAB Capital, has threatened to block any deal to restore stability to the troubled bank that would not deliver value for money for shareholders.
