Northern Rock sale to net extra £583m
Britain will make a further £538 million sterling (€749 million) from the sale of failed lender Northern Rock to Richard Branson's Virgin Money, the body set up to manage the government's stakes in bailed-out banks said today.
UK Financial Investments (UKFI) said that Britain's finance ministry had received a further £73 million in cash from the sale, in addition to the £747 million received on completion.
The additional payment had been linked to Northern Rock's net asset value on the completion date of January 1st, 2012.
Meanwhile, UK Asset Resolution, the body set up to wind down Northern Rock's loans, has agreed to sell £465 million pounds of mortgage assets to Virgin Money, the banking arm of Branson's Virgin Group, at par.
"These transactions are consistent with UKFI's objective to manage the government investments commercially and to create and protect value for the taxpayer as shareholder," said Keith Morgan, head of wholly owned investments at UKFI.
The government could potentially receive more than 1 billion pounds in total from the Northern Rock sale, but that still represents a loss on the £1.4 billion in equity pumped into the lender by taxpayers.
UKFI said that the deals bring the total cash proceeds from the sale of Northern Rock to £820 million.
That is in addition to £150 million pounds of Tier 1 capital notes and a further cash payment of between £50 million and £80 million if the business is floated or sold in the next five years.
Northern Rock, a former mutual that used cheap wholesale finance to grow aggressively in the mortgage market, rose to become Britain's fifth-biggest provider of home loans by the middle of the past decade, claiming a place in the FTSE 100 share index.
But the group was starved of funding after banks stopped lending to each other in the 2007 credit crisis, triggering the first run on a British bank in decades and prompting the government to step in with emergency support.