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HM Treasury announced a new financing structure that could be made available to Northern Rock and other interested parties, for a possible private sector solution for the entire company. The proposed financing structure envisages Northern Rock raising funds from investors in the financial markets backed by a mixed pool of assets. This structure would ensure all Bank of England loan facilities to the company are repaid in full, with interest, upfront, as soon as the funds are raised. To facilitate this, the Treasury would put in place a guarantee for the payment of investors in the event that the assets were insufficient to fulfil the obligations, although any losses to the asset pool would first be borne by Northern Rock to protect the taxpayer. Northern Rock would pay a fee for this guarantee in addition to the fees for the existing guarantee arrangements which will continue.
HM Treasury and the Bank of England, as providers of financial support to the company, and the Financial Services Authority, as its regulator, will consider proposals received by 4 February from Northern Rock and other interested parties.
The Tripartite Authorities recognise that any proposal relying on this financing structure is likely to involve state aid, which would require approval by the European Commission, and will submit a restructuring plan to the Commission by 17 March.