First among equals

26 November 2007 By Mike Verdin

The Virgin entrepreneur s bid for the stricken UK bank offers something for everyone government, central bank, region, staff and shareholders. That gave him the edge over JC Flowers taxpayerfriendly offer. Branson looks on target for what could be, for him, a lucrative deal.

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Northern Rock, the stricken UK bank, said that it had entered accelerated discussions with a consortium led by Sir Richard Branson's Virgin Group. The decision followed talks with the Bank of England, the Treasury and the Financial Services Authority.

The consortium plans envisage injecting £1.3bn of cash and Branson's Virgin Money group, valued at £250m, into Northern Rock. Half of the cash would come from a rights issue to existing investors.

The consortium said it would rebrand Northern Rock as Virgin Money and install a management team including Sir Brian Pitman, the former Lloyds TSB boss, as chairman. The bank, which would continue to operate from Newcastle, would target a credit rating of no less than single A.

The consortium, which also includes First East Investments, Toscafund, and WL Ross & Co, would hand £11bn to the Bank of England upfront with a clear path to repaying the balance of state loans. The consortium agreed to a restriction on its returns from Northern Rock until the state is repaid in full.

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