Northern Rock Exploring Sale Options
Distressed UK lender Northern Rock is exploring a potential sale, having announced that it is suspending its dividend payment for now. As late as yesterday, the company insisted it would pay its dividend of roughly $119M USD.
According to reports, UK regulators have hired Goldman Sachs to advise the lender on strategic alternatives. In today’s WSJ, the BreakingViews column suggests that this appears to be closing the barn door after the horses have left.
According to Credit Sights, there remain three alternatives for the troubled bank:
The situation is very fluid, but for now we see three main possibilities: i) an acquisition, ii) an orderly wind-down and iii) a stabilisation and return to stand-alone operations.
Credit Sights suggests that an acquisition by a larger bank would likely be the preferable outcome for debt holders and the Bank of England, though perhaps not as attractive for shareholders. They see a wind-down as relatively painless, but a less-likely option. A stabilisation program, seems even less likely, particularly due to response of the market.
The Credit Sights report, Northern Rock: Will They, Won’t They?, is available for purchase here.
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