Northern Rock - Treasury provides guarantee details

HM Treasury have announced the details of the Guarantee for depositors of funds with Northern Bank PLC.

This extends for retail customers to -

1. Accounts existing at midnight on Wednesday 19 September.
2. Re-opened accounts that were closed between Thursday 13 September and Wednesday 19 September.

Putting them on the same basis as National Savings and Premium Bonds and Government Stocks - opened an account since yesterday - Tough Luck pal, according to the Treasury such a gurantee would be - quote - "unfair".

For wholesale market funding the arrangements would only cover:

1. Existing and renewed wholesale deposits; and
2. Existing and renewed wholesale borrowing which is not collateralised.

The arrangements would not cover other debt instruments including, covered bonds,securities issued under the “Granite” securitisation programme, subordinated and other hybrid capital instruments. i.e All that asset backed shit on their Balance Sheet of at least £550 Mn. etc.,

"The guarantee in relation to Northern Rock plc will remain in place during the current instability in the financial markets.", whatever that means - but it is obviously at the discretion of the Treasury.

There is nothing said about the guarantee being transferred with ownership should a successful take-over be concluded.

Northern Wreck on the Markets today

Northern Wreck closed down @185.2 ( Daily low of 174) down 28% - Bradford & Bingley Plc fell 8.6 % and Alliance & Leicester Plc 7.3 %. Bloomberg reports that the shares may drop to 150 pence, reflecting Northern Rock's ``maximum bid value'' in a takeover, Citigroup Inc. said in a note today.

Standard & Poor's re-rated (Trans : buried ) Northern Wreck's undated subordinated debt by four levels to junk. Northern Rock's 200 million-pound 7.053 percent undated subordinated bonds trade at 75% percent of face value currently.

RAB Capital Plc, London-based hedge fund managers, bought 20.5 million shares (4.87% of the equity) of Northern Rock yesterday.

RAB capital Plc was founded by Philip Richards (Ex Army and PPE at Oxford) and the dapper suited Michael Alen-Buckley (Rocco Forte's bro. in law) and launched on AIM in March 2004 at 40p and closed today @ 95p. They have £6-7Bn assets under management in a range of funds. Ex Chancellor of the Exchequer, man about town, ex bon viveur, ex MP Norman Lamont who has seen his fair share of Treasury cock-ups is a non-Executive Director.

The Mittal steel family also have a discloseable interest of 4.5 % of RAB through their private vehicle Karrick Trust.