Northern Rock to sell $4.3 bn mortgages to JPMorgan
Northern Rock, the UK bank bailed out by the Bank of England, agreed to sell mortgages valued at £2.2 billion ($4.3 billion) to JPMorgan Chase to help repay loans from the central bank.
By Bloomberg |
LONDON: Northern Rock, the UK bank bailed out by the Bank of England, agreed to sell mortgages valued at £2.2 billion ($4.3 billion) to JPMorgan Chase to help repay loans from the central bank.
The asset sale is Northern Rock’s first since it was forced to borrow about £25 billion from the Bank of England. Northern Rock, whose announcement of emergency aid on September 14 triggered the first run on a UK bank in more than a century, has until mid-February to show how it will repay the debt. “This really does look like a desperate measure,” Simon Maughan, an analyst at MF Global Securities in London, said in an interview on Friday.
“Shareholders would seriously start to object if the balance sheet was sold piecemeal out from underneath them.” He has a “neutral” recommendation on the shares. The sale will allow the bank to repay £2.25 billion of its central bank debt, Northern Rock spokesman Brian Giles said in a telephone inter-view. JPMorgan is paying about £50 million more than the balance-sheet value of the assets, the Newcastle, England-based bank said in a statement on Friday.
The deal with New York-based JPMorgan represents about 2% of Northern Rock’s gross assets as of June, chief executive officer Andy Kuipers said in the statement. The bank’s shareholders will meet on January 15 to decide whether to make asset sales of 5% or more conditional upon investor approval.
The asset sale is Northern Rock’s first since it was forced to borrow about £25 billion from the Bank of England. Northern Rock, whose announcement of emergency aid on September 14 triggered the first run on a UK bank in more than a century, has until mid-February to show how it will repay the debt. “This really does look like a desperate measure,” Simon Maughan, an analyst at MF Global Securities in London, said in an interview on Friday.
“Shareholders would seriously start to object if the balance sheet was sold piecemeal out from underneath them.” He has a “neutral” recommendation on the shares. The sale will allow the bank to repay £2.25 billion of its central bank debt, Northern Rock spokesman Brian Giles said in a telephone inter-view. JPMorgan is paying about £50 million more than the balance-sheet value of the assets, the Newcastle, England-based bank said in a statement on Friday.
The deal with New York-based JPMorgan represents about 2% of Northern Rock’s gross assets as of June, chief executive officer Andy Kuipers said in the statement. The bank’s shareholders will meet on January 15 to decide whether to make asset sales of 5% or more conditional upon investor approval.
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