Northern Rock Share Discussion Threads

[greycioud] 26/8/2008 10:21

ROFLMAO!!!!!!

[onsider] 26/8/2008 08:11

GreycIoud

Why do you care anyhow? Are you just here to gloat or do you have a realy interest somewhere.

Oh, and please don't give the lame "I'm a tax payer" line. The Tax payer has no actually seen any financial impact yet.

[scribbler101] 25/8/2008 23:52

There's an American phrase that means "Is that really true?"

Can't just bring it to mind, but I'm sure it's apposite.

[kpwuk] 25/8/2008 23:17

Yes, he's talking through his bot.

[greycioud] 25/8/2008 15:15

LOL!! No compo it is then. A true muppets lament.

[scribbler101] 25/8/2008 09:33

Grey

Do you have a bot set up to respond to posts here?

[greycioud] 25/8/2008 09:32

Looks like an open & shut case for NO compo.

[scribbler101] 25/8/2008 09:28

What is at the heart of this is the bizarre assumption that the government is engaging in highly speculative investment with a view to profit. What the government is SUPPOSED to do is provide liquidity to the solvent and let the insolvent fail.

[kpwuk] 25/8/2008 08:30

Northern Rock sale to Virgin risked £2bn loss
By Katherine Griffiths Financial Services Editor
Last Updated: 11:27pm BST 24/08/2008



Taxpayers would have lost as much as £2bn if state-owned Northern Rock had been sold to Sir Richard Branson's Virgin or another private bidder, according to Treasury sources.

In a move that surprised the City, the Government announced on February 17 that it would nationalise the bank. The decision was in large part based on a report by Goldman Sachs, the Treasury's adviser, that has until now been kept secret.

Goldman's analysis is understood to show that the Northern Rock takeover proposal from Virgin would have left the taxpayer providing a hefty subsidy as part of the deal, made up of financial risks left with the Government.

In a worst-case scenario, the figure could have topped £2bn under the Virgin proposal, while the bill for the other private sector option - allowing a management team led by Bryan Sanderson and Paul Thompson to run the bank - could have been almost as much, sources close to the Treasury said yesterday.

By comparison, Goldman told the Treasury that nationalisation of the bank risked leaving the taxpayer subsidising Northern Rock by between £450m and £1.28bn. As the sum was less than the private sector scenarios, it was one of the key reasons the Government decided to take the plunge with nationalisation, sources said.

Goldman's analysis on the politically sensitive subject of taxpayers' exposure to Northern Rock was cited in written evidence by John Kingman, the senior Treasury official in charge of Northern Rock.

The Treasury had submitted the advice to the High Court as part of a judicial review of the nationalisation.

Northern Rock, now run by government fixer Ron Sandler, is repaying the £50bn loan the Government made to the Newcastle-based bank in order to keep it afloat.

The disclosure that the taxpayer could end up footing some of the bill, if Northern Rock's assets deteriorate to such an extent it is unable to repay the loan fully, will be an embarrassment for the Government, which has refused to acknowledge the risk publicly.

When Northern Rock was nationalised in February, the Chancellor, Alistair Darling, said nationalising and selling the bank when the time was right would allow the taxpayer to participate in all of any potential upside.

Mr Kingman claims in his evidence that the proposals by Virgin and the management team might have led to the taxpayer reaping profits of £230m through a profit-sharing scheme. But to hit that figure, the private sector bidders would have made about 10 times as much.

The private sector would have paid about £200m in fees to the Government, and would have footed the bill for the ongoing running costs and unemployment costs.

The judicial review was brought by Northern Rock's shareholders, led by hedge funds SRM Global and RAB Capital. They strongly opposed nationalisation and have argued that they are entitled to about £4 a share in compensation for their equity being wiped out. A court date is set for mid-January.

The Government is about to appoint a firm to come up with a compensation figure. It has said that as a starting point the valuer "must assume that the company is unable to continue as a going concern". The favourite to be selected as the valuer is thought to be American bank Houlihan Lokey.

[kpwuk] 24/8/2008 12:49

The government propaganda continues:

From The Sunday Times August 24, 2008

Taxpayers face £1bn Northern Rock loss
Taxpayers stand to lose at least £450m on the nationalisation of Northern Rock, according to warnings from the government's own advisers. Goldman Sachs told the Treasury in February that losses to the public purse could stretch to £1.28 billion even in benign market conditions, leaked court documents have revealed.

The explosive revelations will add to concerns over the level of public subsidy for Northern Rock, which still owed the Bank of England £17.5 billion at the end of June.

Alistair Darling, the chancellor, has defended the nationalisation by arguing that the taxpayer's exposure to Northern Rock is secured against a high-quality mortgage book. The new documents, however, offer the first indication that the government believes it could lose money on the deal.

The figures have been revealed by John Kingman, the senior Treasury official in charge of Northern Rock, in written evidence submitted to a judicial review into the decision to nationalise the lender.

Kingman's evidence, seen by The Sunday Times, states that "under none of the scenarios was it contemplated that the government would, taking this subsidy into account, make a net profit from taking Northern Rock into the public sector".

Advisers from Goldman Sachs, who shared in a £45m pot of fees for their work on Northern Rock, told the Treasury that in a "base case scenario" the Treasury would be left with a "net subsidy" to the bank of some £1.28 billion.

Even on the "optimistic scenario" there was estimated to be a shortfall to the public purse of £450m, Kingman's evidence claims.

The documents do not disclose an exact figure for the taxpayer's liabilities should Britain go into recession, which some economists now believe is a real danger.

Kingman's testimony suggests that Treasury officials did not consider it likely that house prices would fall by 15%-25% – a level that begins to put Northern Rock's mortgage book into danger.

The ratings agency Standard & Poor's has since predicted that a fall on this scale will be witnessed by next April. HBOS and Lloyds TSB have made similar predictions.

The evidence comes in response to claims made by SRM Global and RAB Capital, the two hedge funds that were Northern Rock's biggest shareholders at the time of its collapse. They have alleged that part of the reason the government nationalised Northern Rock was that ministers knew they could profit by selling it back to the private sector at a later date.

Kingman also said that both the Virgin takeover and a separate proposal put forward by the bank's previous management team, led at the time by former chairman Bryan Sanderson, claimed they could have reaped profits for the taxpayer of up to £230m, through a profit-sharing scheme.

The private-sector bidders, however, would have made ten times as much money under these circumstances.

"Ministers considered that this share of the returns was disproportionate to the share of risk borne by the taxpayer – or in other words the private provider would receive an excessive return relative to the risk taken," the documents claim.

Northern Rock's recent results showed that it lost £584.5m in the first six months of the year.

The level of arrears in its mortgage book had more than doubled over this period.

The Treasury also converted £3 billion of its loans to Northern Rock into equity, to provide an additional cushion of capital for the bank to see it through the credit crisis.

In a letter sent this month to John McFall, chairman of the Treasury committee, the chancellor said "the value of the additional equity will be reflected in the sale price for Northern Rock on return to the private sector".

However, the advice from Goldman Sachs ahead of nationalisation assumed that the government would achieve a sale price of only about £1.24 billion for the bank, according to Kingman.

[k38] 23/8/2008 20:54

I think the goverment have two choices:
give back the bank to the shareholders or pay compensation.
That will happen long before the banks go private again.

[greycioud] 23/8/2008 10:18

Bullsh*t!!!!!!!!!!!!!!

[bryan2] 23/8/2008 07:29

Has anyone noticed that excess in the stranded Bradford & Bingley rights issue has had to be picked up by Barclays ,HBOS and RBS and other big British FIs.
It seems unlikely that these Banks suddenly decided to pick up essentially more mortgage backed securities.
It seems more likely that the BoE has orchestrated a behind the scenes rescue operation?
I am not objecting to the BoE action and in fact would support it.
However it is exactly the operation that the BoE ruled out in the case of Northern Rock!
Apparently Mervyn King said it would contravene a whole raft of European Banking regulations.
I hope that the lawyers acting for NRK shareholders are taking note.

[aroleid] 22/8/2008 14:36

"Nationwide, the UK's biggest building society, plans to open a savings operation in Ireland – allowing it access to funding from the European Central Bank"

"There was talk at the time that if the Crock had done something similar (they had a branch in Ireland, but it was passported rather than authorised there), they might have managed to scramble through..."

- which supports Jon Wood's contention that suport from the lender of last resort (BOE) would have meant no need to confiscate the shares

[russy1] 22/8/2008 11:58

Where's my compensation

I have been waiting long enough now !!

[coogar] 21/8/2008 17:09

And, bryanmuppet, I think all but the muppets can safely say we know who comes last.

[coogar] 21/8/2008 17:09

(duplicate post)

[coogar] 21/8/2008 17:07

Greycloud

bryanmuppet can't think for himself so you will find him quite regularly reading stories that align to his own plight and regurgitating them on here.

Six months since nationalisation and the muppets are still staring down the barrel of 'no compensation'

He really does need to get a grip on reality.

[greycioud] 21/8/2008 07:45

Bullsh*t!!!!!!!!!!

[bryan2] 20/8/2008 17:42

The 'Bonds' referred to here are probably converted PIBs from days when NRK was Building Soc.
These entities are often called junior debt as they rank second last in order of payout of dividend and capital.The company (here NRK) is not obliged to pay out any dividend unless a dividend is paid to equity shares.
Last year when (at the last moment) the equity dividend was not paid the PIBs were paid.
I think this was a result of the chaos around at the time rather than any well thought out policy.
Now that the equity shares have been confiscated there is no legal reason for HMG to pay the former PIBs.

[miata] 20/8/2008 16:47

You usually are below several in England.

[scribbler101] 20/8/2008 16:43

But I feel as if I am below a grey cloud.