U.S. private equity eyes Northern Rock

Stephen Beard Oct 1, 2007


Doug Krizner: The subprime crisis has already devastated a long list companies, including one of Britain’s largest mortgages lenders, Northern Rock. And now there are reports two U.S. private equity firms are considering taking over portions of Northern Rock’s assets. We have more from London, and Stephen Beard.

Stephen Beard: The two American funds, Cerberus and JC Flowers, are said to be keen to start takeover talks. According to reports, they want to buy Northern Rock’s portfolio of mortgages.

The U.K. Treasury has apparently given the all-clear. Northern Rock is effectively under government control. The central bank has lent it $16 billion, and so is calling the shots.

No one at the Treasury was available for comment. But Roger Lawson, who speaks for Northern Rock shareholders, objects to what he calls a fire sale of the company’s assets:

Roger Lawson: The problem with fire sales of any company is that it gives the initiative to the buyer, who tends to drive the price down because they know the seller can’t walk away.

He says an American buyout would be ironic.

Northern Rock’s own mortgages are reckoned to be sound. But the company ran into trouble raising money because of the American subprime mortgage debacle.

In London, this is Stephen Beard for Marketplace.

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