THE government received at least two bids for Northern Rock yesterday, six weeks after it kicked off the privatisation of the lender bailed out during the financial crisis.
Virgin Money and private equity firm JC Flowers are both understood to have made indicative offers for the Northern Rock “good bank” that is on sale, with the “bad bank” – supposedly the Rock’s most toxic assets – having been hived off into a separate firm.
City A.M. has also learned that Apax Partners, the US private equity firm, is in talks to fund another bid, though its possible partner for such an offer in unknown.
Virgin Money’s bid is to be funded by a mix of US, UK and Middle Eastern capital as well as cash from its parent group. Analysts expect the assets to fetch about £1.5bn.
Insurance tycoon Clive Cowdery is understood to be keeping an eye on the sale but has not made an offer, while Blackstone, which requested the Rock’s information memorandum, has dropped its interest.
Paragon Mortgages has also said that it will look at the assets, but it is not clear if it made an offer. There were also reports that Coventry Building Society had sent in a bid, which would please those who want to see the Rock mutualised.
Virgin Money is also in talks with Lloyds over its sale of 632 branches, but has not made an offer on those assets.
As City A.M. reported last week, Virgin believes that the Northern Rock assets on sale are a simpler prospect for a start-up bank because they have a loan-to-deposit ratio of 72 per cent on £17bn of deposits, with all of the loans in mortgages.
The Lloyds branches, by contrast, have a loan-to-deposit ratio of 130 per cent on £68bn of mixed assets, equating to a £30bn funding gap. All parties declined to comment.