Rock: no new bidders
Here’s some disappointing news for the Northern Rock, its shareholders, the Treasury and taxpayers.
The Rock and the Treasury had expected there would be fresh bidding interest for the battered bank, sparked by the Treasury’s promise of financial support to Northern Rock for at least five years.
The Treasury’s proposal to guarantee up to £40bn of new bonds to be issued by the Rock surely transformed any Rock rescue deal from no-hoper to sale of the century.
The world’s banks and financial institutions were bound to trample each other in the rush to obtain a piece of the action – because the Rock is probably now the only retail bank in the world which can be completely confident of its funding for years to come.
No such luck.
Not a single new potential rescuer has emerged.
In fact, if anything the outlook is a bit gloomier than it was - because one of the groups still technically in the game, the management of the Rock itself, is struggling to raise the requisite amount of equity.
And they have just three days left to submit their definitive offers.
But why does the Rock remain so unloved and unwanted, even after the Treasury has stuffed it with readies?
Partly because, as I pointed out in an earlier blog, the Treasury is not being quite as generous as it seems – in that it’s understandably demanding that any future losses in the special purpose vehicle issuing the bonds would fall first on the Rock, its rescuer and shareholders before hurting taxpayers.
Also there was not a lot of time available for any potential new bidder to do its homework before the deadline.
However what the emptiness of the auction-hall really tells you is that most of the world’s financial institutions are very anxious beasts at the moment.
This is not the time to embark on new takeover adventures, they feel, but to conserve capital and batten down the hatches.
Taking over a £100bn mortgage bank when the economy is turning down doesn’t feel quite right to them, however attractive the terms.
It’s all particularly nerve-wracking for the prime minister, Gordon Brown.
He insisted on the bond-solution as an alternative to nationalisation.
In doing so, he took a big political and financial risk.
So if the Rock were yet to be nationalised – and that’s not impossible – he would have quite a lot of explaining to do.