Northern Rock

Aegis

TEDDYRUKSPIN wrote: »

Why is so many people worried about Northern Rock? For one thing, the government won't allow another bank going in the pan like the last one. It will greatly hurt the economy.

Probably not, no, though this is the first major high street back to have any such problems in over 100 years if I remember what the various articles have said. However, this does not rule out the shareholders getting royally screwed over by whatever arrangements are needed to save the bank, its deposits, its branches and its employees. The risk of holding shares is that at times you appear pretty far down in the pecking order.

Secondly, I would think it would be stupid for NR to nationalised? What benefit will this be to the government? 2 bids are on the table but NR do not want to this up. I believe they should and allow another company to help them out. Something like Virgin Northern Rock etc. The NR brand is ruined and only another well know company can bring it out of the brink.

Nationalising the company puts the roughly £55billion in debts and guarantees directly under government control, ensuring that the taxpayer (a major creditor to the business) doesn't lose out. Unfortunately for shareholders, the general public's money has been used to protect their interests, and these loans must be paid off in priority to the shareholders. Since NRK seems reluctant to accept either of the current bail-out offers from other companies, the government has to consider drastic action. Even more so since the EGM plans to limit the ability of the board to run the company effectively.

This bank is safe as chips and the only people that should be worried is the staff! It was the incompetence of the staff that resulted in this fiasco. All pointed to greed. NR are not the only bank to fall to this. Only the media is pointing their finger at them. Other banks following the LIBOR are already in trouble but other investments in the bank are balancing the books.

As I said, £55billion total has had to be set aside for NRK this year. I don't know of any other institution that has had to rely on this much special financing from the government. To put it another way, if the government hadn't extended credit lines to NRK, the bank would have gone bust, unable to raise the liquid assets to pay of its immediate liabilities. This situation is quite simply unique.

It you like the products NR are offering you, go for it.

This I very much agree with. Despite all the problems, NRK is clearly not going to be allowed to fail, so savers should continue to go to them if the rates are any good.



Interestingly enough, I think that £55billion is almost twice the defence budget for a year, and even exceeds the bill for keeping the NHS alive in any one tax year... It's a lot of money when put into perspective like that!

bristolleedsfan

Aegis wrote: »

ensuring that the taxpayer (a major creditor to the business) doesn't lose out. Since NRK seems reluctant to accept either of the current bail-out offers from other companies, the government has to consider drastic action.

quote]

Reports have said that both interested parties for NR have problems raising the funds, NOT that NR are reluctant to accept either of the offers, in fact NR chairman has publicly declared his backing for Virgin Bid.

Aegis

ok, allow me to rephrase my very badly worded previous statement...

"Since NRK shareholders seem reluctant to accept either of the current bail-out offers and look set to stop the board from being allowed to consider them without more EGMs, the government has to consider drastic action."

That any better?

bristolleedsfan

Aegis wrote: »

ok, allow me to rephrase my very badly worded previous statement...

"Since NRK shareholders seem reluctant to accept either of the current bail-out offers and look set to stop the board from being allowed to consider them without more EGMs, the government has to consider drastic action."

That any better?

nope not any better , NR shareholders are in favour of the olivant takeover bid, as mentioned before, earlier reports have said that BOTH bidders i.e virgin and olivant are having problems funding there bids.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/08/cnrock108.xml

http://www.business24-7.ae/cs/article_show_mainh1_story.aspx?HeadlineID=821

i love your first "golden rule" :T

Aegis

bristolleedsfan wrote: »

nope not any better , NR shareholders are in favour of the olivant takeover bid, as mentioned before, earlier reports have said that BOTH bidders i.e virgin and olivant are having problems funding there bids.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/08/cnrock108.xml

http://www.business24-7.ae/cs/article_show_mainh1_story.aspx?HeadlineID=821

i love your first "golden rule" :T

Ahh, the first golden rule is great. Means that if I mess up what I write here, people still have no-one to blame but themselves.

Anyway, coming back to the matter at hand, I wasn't actually aware that the shareholders were generally insupport of either bid. Then again I've been paying attention to the ones I interact with frequently rather than the much larger hedge fund investments. The general attitude I've encountered seems to be one of "we'd rather it just kept going the way it is now!", which is why I was of the opinion that I had.

Checking the first article, I see that olivant has 23% of the shareholders for accepting its, leaving quite a gap between where we are now and acceptance of any offer...

The second article... I'd read a similar one on citywire a while back, and had forgotten. I shall slap my wrist for you now if you like!

Still, I think that there's some real division among the shareholders as to whether they'd actually want EITHER bidder to take over or not, not to mention the secondary division between the pro-Virgin and pro-Olivant camps.

All in all, I can summarise by saying that I write what I think, and I think there is some serious opposition to both bids, or at the very least some serious voter apathy!

bristolleedsfan

Aegis wrote: »

Checking the first article, I see that olivant has 23% of the shareholders for accepting its, leaving quite a gap between where we are now and acceptance of any offer...

Virgin and Olivant have both put "offer plans" into the public domain to which the biggest Shareholders voiced support for the Olivant plan, small shareholders have neither been asked by the media nore had a vote because neither of the "offer plans" appear to have been backed up by funding._pale_ ( bit like someone making an offer to buy a house and then finds he cant get a morgage)

Both "offer plans" are worthless unless they can be backed up with "funding"

if both "offer plans" were funded and i as a shareholder was asked to vote on both offer plans i would vote for the "Olivant" proposal as i imagine most the shareholders would as it appears to offer a higher "shareholder value"

Aegis

bristolleedsfan wrote: »

Virgin and Olivant have both put "offer plans" into the public domain to which the biggest Shareholders voiced support for the Olivant plan, small shareholders have neither been asked by the media nore had a vote because neither of the "offer plans" appear to have been backed up by funding._pale_ ( bit like someone making an offer to buy a house and then finds he cant get a morgage)

Both "offer plans" are worthless unless they can be backed up with "funding"

if both "offer plans" were funded and i as a shareholder was asked to vote on both offer plans i would vote for the "Olivant" proposal as i imagine most the shareholders would as it appears to offer a higher "shareholder value"

Have to agree with everything you said there

Especially about the shareholder value thing, as the Virgin plan just seemed bizarre for the shareholders.

harryhound

http://news.bbc.co.uk/1/hi/business/7188472.stm

Live audio (bit like an auction for a famous painting) feed anyone?

As I feared, the chaos is getting nearer and nearer to being fought out in Prime Minister's question time.

That entertainment show will be a big hit with its fans in USA but won't do this country any good.

- Jon Wood, a £20m-a-year UBS trader, is now planning Monaco's first hedge fund, SRM Global this autumn.[2006]. He was criticised by Mr Justice Warren over a business dispute as a "very hard and calculating man".

Better inside the tent than outside? (If you know what I mean)

Here is the other partner, RAB Capital, "one of the most highly regarded hedge funds":
http://www.ft.com/cms/s/0/0c05d602-a78b-11dc-a25a-0000779fd2ac.html?dlbk


More links:
http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=429272&in_page_id=3

NR has well over 100,000 shareholders but, according to Channel 4 News, only 600 managed to turn up. The directors were taking no chances and had booked a 11,000 seater venue.
It looks like the directors played their cards successfully and have managed to agree a modus operandi with the hedge funds. So that is a little step in the right direction.

Jon Wood was reported to have laid into the reputation of Alistair Darling, pointing out that "Trillions" had been pumped into the banking system round the world BUT only here in UK had a bank been named and shamed.
Now we know who is financing gold to an all time record price. As in 1987 "capitalism" has lost its
nerve, and (quite rightly) the government's money men are pumping out extra liquidity to try and keep the wobbling and shuddering economy on the tracks. Well Alistair, Margaret Thatcher's chancellor Nigel Lawson, did the right short term thing in 1987 by expanding the money supply, but you and Gordon have played that card already. NR nationalisation will break the increasingly tarnished "golden rule". We really are at the cusp of financial history. What is it going to be? More money supply, a pound slumping further, followed by banana republic inflation or "stagflation"?
Either way it is not looking good for you in the history books; Nigel Lawson did not last long when he had to carry the can for developing problems of recession and housing market difficulties; after he and Margaret had to put on the brakes!
Eventually, in the early 1990s the number of mortgages in arrears topped 200,000 and repossessions reached 60,000 a year.

codger

'S all right. It must be me. But earlier posts about shareholder interests and go-for-it with Northern Rock and how wonderful Northern Rock truly is struck me as slightly odd given that Northern Rock is dead and has been even before its boy wunderkind CEO Mr Applebum retired to his country mansion and various Ferraris.

NR is surely only in a state of embalment at the moment thanks to expensive undertaking work carried out by HM Government / taxpayer undertaking / under writing.

Having already rehearsed its defence several times today -- "the last Govt to nationalise anything was the Tory Government with Rolls Royce" -- Labour is, I guess, ready to nationalise now.

And if for the short term, is that necessarily a bad thing?? I doubt the corpse can be revived, but at least some of its organs might be flogged off to better purpose.

harryhound

Surely Labour with Railtrack?

Unless there is something rotten in NR that I don't know about (Granite?) NR has just been foolish by relying on other banks' money.
The funds that NR needs to keep trading are peanuts compared with Citi Banks crystallised losses.

The following links suggest that Granite is structured on the basis that NR will always expand, (or have to deal with a penalty ?) - it sounds a bit like the problem Cedric (not the pig) had at British Gas with the take or pay contracts. There is also the suggestion that the market will only buy mortgages at a discount of over 4%, I wonder what that says about the future repossessions hidden in all UK mortgage books?

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/15/cnrocknat215.xml

http://www.allenovery.com/AOWEB/NewsMedia/Editorial.aspx?contentTypeID=1&contentSubTypeID=7946&itemID=22965&prefLangID=410