LONDON -
An endorsement for the Bank of England's rescue package for Northern Rock from the European Union provided fleeting relief to shareholders on Wednesday, as yet another group was reported to have dropped out of the bidding for the beleaguered mortgage lender.
Jonathan Todd, a spokesman for EU competition commissioner Neelie Kroes said that the Bank of England's decision to offer Northern Rock an emergency line of funding to help it to continue to fund its business was in "full conformity with guidelines on rescue aid."
Though the backing of the European Commission should improve Northern Rock's prospects of finding a bidder, a report that a consortium involving the U.S. private-equity company Five Mile was about to drop out of the bidding weighed on its share price. Northern Rock closed down 2.9%, or 3 pence, at 100 pence on Wednesday.
Though Northern Rock is in talks with a consortium led by Richard Branson's Virgin Group, the government isn't taking any chances.
The Wall Street Journal reports Northern Rock said Friday it had agreed to sell a portfolio of mortgages for GBP 2.25 bln ($4.42 bln) to JP Morgan (JPM). Shares in Northern Rock rose on the news, gaining 4.4% to 89 pence in early trading on a slightly lower London market.
Natsionaliseeritakse riigi poolt...
The U.K. Treasury said Wednesday that it will withdraw the 100% guarantee on deposits held at nationalised mortgage lender Northern Rock on May 24. The guarantee was put in place in 2007 as the government attempted to stop a run on the bank after it had to seek emergency funding from the Bank of England. Once the guarantee is lifted, savers will continue to be protected by the Financial Services Compensation Scheme, which currently guarantees the first 50,000 pounds of deposits at all U.K. banks. The decision to lift the guarantee follows the bank's restructuring earlier this year, in which it was split into a "good bank" comprising the savings business and new loans, and a "bad bank," which holds riskier old loans.