Northern Rock has £53bln of mortgages owned by offshore company?

[carpedeum]

http://www.guardian.co.uk/business/2007/nov/23/northernrock.bankofenglandgovernor

Final paragraph should be of interest to the British Government...

"This should be a concern for the Bank and the Treasury particularly if the emergency loans have actually been used to finance the activities of Granite rather than Northern Rock. It would be harder for the government to secure preferential treatment over other creditors if it is shown that the money was actually for Granite's benefit," he said.

 

[Nemesis]

I'm convinced the media won't be happy until they've scared every last depositor away from the bank. Talk about a non-story! I read about this Granite program weeks ago and it's clearly nothing new to people in the industry. Yet the Guardian come along and scream: 'Massive hole in Northern Rock's assets' on the basis of it. It's the kind of sensationalist headline I'd more commonly expect from a tabloid.

Northern Rock says no asset hole

 

[Nemesis]

What is it with the Guardian and Northern Rock? I see they're at it again today, talking up administration as an outcome. Not content with their silly 'revelation' yesterday that NR has a securitisation vehicle (something the Guardian seems to think was concealed from everyone before they finally figured it out) they're now pushing this most unlikely option as a real possibility. Is it official Guardian editorial policy to scare NR's depositors and completely destroy the bank's remaining deposit base or something?

I love this bit though

But we've entered some very choppy waters and what happens, say, if Paragon [a buy-to-let lender] and other lenders were to struggle and go under? Will the government guarantee that as well?"

Why bring Paragon into the argument? It doesn't have any depositors and is 100% funded from wholesale money markets. Yet this guy is talking about guarantees?

It's ridiculous to talk up administration in the circumstances. The only reason why this should happen is because shareholders refuse all the offers and the UK government uses this 'nuclear option' against them. There is no reason for it to come to this given that two of the offers (Virgin and Luqman Arnold's Olivant) do not wipe out shareholders and in fact offer them the prospect of sharing in the bank's recovery (Admittedly their holding is diluted but it's still a far better outcome than many thought). Philip Richards of RAB Capital, the largest shareholder, today expressed approval for these two offers.

"We would vote against any offer which seeks to wipe shareholders out or nearly wipe shareholders out, particularly when we know that there are two good offers out there which could lead to a complete rebuilding of value for all shareholders,"

They also look more appealing for the UK government as well (Virgin perhaps more so, as it appears they would repay more of the debt straight away). Putting NR into administration would be an unmitigated disaster for Labour and would be totally at odds with the assurances and guarantees already given to depositors (if it led to a significant delay in accessing their money). It would also see a forced sale of assets at the worst possible time which could perhaps lead to a loss for the UK Treasury on the loans already advanced. It also wouldn't go down well in Labour's political heartland in the north east of England. So for the Guardian to give this outcome such prominence right now strikes me as laughable. Perhaps they want to extract the very last sensationalist value from the story before the UK government decide on a bid and the uncertainty surrounding the Rock abates.