Chancellor Ready to Use Veto on Bids for Northern Rock
By Sean FarrellFinancial Editor
The Chancellor said yesterday that the Treasury would veto any sale of Northern Rock that did not meet its requirements as the stricken bank revealed that bid proposals received so far had been below its market value.
Alistair Darling told the House of Commons the Government's main aim was to get its money back as quickly as possible. He drew a clear distinction between the Government's priorities and the board's respo nsibility to shareholders.
Northern Rock is thought to have received up to 10 expressions of interest from potential buyers since its loose Friday deadline, but all were "substantially below" the bank's closing market value on Friday, the bank said yesterday.
Mr Darling told the House of Commons: "The Government is, as a major creditor, a very direct investor in the future of Northern Rock and has to agree to any proposals for the future of Northern Rock." Any sale "would have to be approved or vetoed by the Government", he added.
Northern Rock's shares slumped 21.4 per cent to a new low as investors found themselves caught between the Government wanting its money back and potential bidders trying to get the best deal possible.
"The Government will step in if the board continues to muck around, because any sale is better than putting Northern Rock into administration or receivership," said Nick Wood, a corporate recovery partner at Grant Thornton.
Mr Darling said the Government's February deadline gave Northern Rock some time to try to find a buyer that could take over the bank on agreeable terms. But the bank's difficulties are so great, a bidder is likely to need Government backing, which could fall foul of European rules prohibiting state aid to companies.
The Government is not ruling out nationalising the mortgage lender as it seeks to put pressure on the board to sort out the mess.
The authorities said bidders should not assume Bank of England funding would continue after the February deadline or when a sale is completed. Mr Darling said the authorities would consider all proposals, but that arrangements would have to comply with European Union state-aid rules.
Vincent Cable, the Liberal Democrats' Treasury spokesman, said the Government should nationalise Northern Rock, perhaps for about three years. He said this was "the least worst option" now that the Government was on the hook for billions of pounds in loans and guarantees.
The Government put Railtrack into administration and bought out its shareholders in 2001. …