Northern Rock has moved a step closer to nationalisation after the three lenders who agreed to loan money to the new buyer announced their intentions to increase the interest rates on the loan. Citigroup, Deutsche Bank and the Royal Bank of Scotland had agreed to loan £10-15 billion to the buyer of the troubled mortgage lender, though Goldman Sachs, who is advising the government on the Northern Rock saga, has now begun to search for alternative loans as a contingency plan in case funding is withdrawn.
News of a potential increase in interest payments may be the final straw for the two remaining bidders, Olivant and the Virgin led consortium. Sir Richard Branson’s company have been involved in takeover talks since they began, and with a conclusion proving hard to reach, patience is likely to be wearing thin.
The increased cost of a takeover is not the only factor which may dissuade any potential buyers. The cheap fixed rate home loans enjoyed by many Northern Rock borrowers are soon to end, increasing the likelihood of customers defaulting on repayments. The recent gloom surrounding the housing market will also contribute to discouraging any potential buyers.
Northern Rock Bank Nears Nationalisation
Northern Rock Bank Nears Nationalisation
Wed, 16 Jan 2008
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