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Northern Rock to Pay Back Emergency Loans
Northern Rock, one of the largest mortgage lenders in the UK, has sold some of its mortgage assets to pay back the emergency loans taken from the Bank of England.
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London (FPRC) 11 January, 2008: Northern Rock, the troubled mortgage lender, has sold 2.2 billion pound portfolio of mortgages to the U.S. investment bank JP Morgan. Northern Rock said that it would use the cash to repay the emergency loans taken from the Bank of England.
Northern Rock said: “The Lifetime Portfolio comprises gross assets with a balance sheet value of 2.2 billion pounds, representing approximately 2% of the company's total assets at June 30, 2007.” The mortgage lender fell into crisis in September last year because of a global credit crunch. At that time, it needed an emergency loan from the Bank of England. Since then, Northern Rock has withdrawn many mortgage and unsecured loans product from the market.
Northern Rock that is up for sale has two leading potential buyers - Richard Branson's Virgin Group and investment fund Olivant. Experts say that the credit squeeze in the market may make it difficult for a private buyer to borrow the funds needed to fund this deal. Some see nationalisation of Northern Rock as a real possibility.
BBC Business Editor Robert Peston said that Northern Rock's mortgage sale may not be a huge progress, but at least the trend is in the right direction. Peston was also of the opinion that Northern Rock did not receive a fire-sale price for its sale of mortgage portfolio.
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Keywords:
Unsecured loans
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