Rock Shares Worth No More Than 40p by Finance News Bulletin

Published: 27/11/07

Today the Northern astound (LSE: NRK) board revealed its favoured offer to repay the £26bn that British taxpayers have so kindly lent to bail out the stricken storeShares in the Rock soared more than 40% on the information before settling back by mid-morning to 110p each, affectation the question

A consortium comprising Virgin collection, Wilbur Ross, Toscafund Asset Management and First Eastern asset Group propose to pump in £650m cash plus the Virgin Money business, which it principles at £250m The joint group would be renamed 'Virgin Money' and stay Newcastle-based, with no disintegrate and few job lossesA further £650m would be raised by selling novel shares at 25p each via a human rights issue to existing shareholders If the latter don't choose to part with any more money, the consortium will arrange for the issue to be completely underwritten, so that the Rock gets the loot anyway

£11bn would be returned to the Bank of England as and when the ink dries on the deal, with ‘a clear path' recognized for repayment in full The administration has promised to ensure savers' deposits are secure whatever the outcomeAnd banking grandees Sir Brain Pitman, former Lloyds TSB (LSE: LLOY) Chairman and leader Executive, and Sir George Mathewson, ex-Royal Bank of Scotland (LSE: RBS) skull honcho, have been drafted in as chairman and as senior adviserAlthough the Northern Rock board is eager to take discussions forward on an ‘accelerated' foundation, nothing is yet signed and sealed

And the deal needs the bob from the Treasury, store of England and Financial Services AuthorityThe pre-announcement stock market worth of the company was around £360m, based on 421m shares in issueEven guessing that the market was being too tough on the astound and that net assets might be value up to three times that amount, ie

around £1bn, the novel overall worth including add-ons would only rise to £26bnThough what about the equity Throw in the store to be issued for Virgin Money, plus the £650m of group cash, with the payment to be stumped up by existing shareholders or their underwriters, all at 25p a go, and what have you got

Northern Rock is still behind depositors fast After the revelations last week that 70% of the bank's mortgages are owned by a Jersey-based trust corporation, how can the conkindium be confident about raising that kind of cash10,000 Rock customers are at least a month behind on their mortgage payments on loans value nearly £12bn, according to the protector last week, compared with only 2,500 (with mortgages of £169m) in similar difficulties at the finish of 2003

And more than 1,000 properties were apparently repossessed by Northern astound last year with a further 912 reclaimed by the end of September this year, against 80 repossessions in 2003LIBOR, the 3-month London interbank rate at which financial institutions loan to each other, is sounding ever louder warning chimes about bankers' jitters nowadays's rate has climbed to 655%, the highest since Northern astound, part I

Well, there are strong rumours of losses up to £300m incurred by the Rock on prearranged investment vehicles and other debt securitiescertain, other bids are possible, but are unlikely to improve considerably on the deal on the table

No guarantees, just more riskSo will I be captivating a punt on astound stock at over £1 when Sir Richard is shelling out just 25 pence a blast No way, Jose© Copyright 1998-2007, The Motley trick Limited

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