UK sells bailed out bank Northern Rock to Virgin

Thu Nov 17, 2011 5:54am EST
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By Myles Neligan

LONDON (Reuters) - Britain has agreed to sell nationalized lender Northern Rock to Virgin Money, the banking arm of Richard Branson's Virgin empire, in a loss-making deal that marks the start of the government's exit from banks it bailed out in the 2008 crisis.

The disposal will fetch between 747 million pounds and 1 billion pounds ($1.2 billion - $1.6 billion), Britain's finance ministry said on Thursday, representing a 400 million pound loss on the 1.4 billion pounds in equity pumped into the lender by taxpayers.

"The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks," Chancellor of the Exchequer George Osborne said in a statement.

Virgin Money, also backed by Texan private equity tycoon Wilbur Ross, had faced competition to buy Northern Rock from NBNK, an investment vehicle set up to create a new retail bank by buying assets from bailed-out incumbents.

British deputy prime minister Nick Clegg said the Virgin Money deal was the best available.

"The strong recommendation made to us was that this was the best value for taxpayers," he told reporters.

"Of course we have an over-riding duty to provide good value to taxpayers and that's what we sought to do through this decision."

The Northern Rock sale was handled by Britain's UKFI organization, which was set up to manage the state's holdings in banks bailed out during the crisis.   Continued...