Northern Rock board proposes plan to keep lender independent

The run on Northern Rock

The board of Northern Rock has asked the government to provide funding for it to restructure the lender without the need for nationalisation or a sale.

In a statement, Northern Rock’s board reveals it has been working with “interested parties“ on its proposal which it says would provide a "better outcome" for the company’s stakeholders.

The proposal includes raising a minimum of £500 million, reducing the assets held on the lender's balance sheet and reorganising its operations.

The aim is to create "an independent, well-capitalised, low cost and significantly lower risk mortgage and savings bank."

The board suggests two phases to get Northern Rock back on its feet. Phase one would see the reduction of its current loan book, the growth of its deposit and savings business and the strengthening of management team through the appointment of Paul Thompson as chief executive officer and Andy Kuipers as deputy chief executive officer. It would also pay down of the bond funding proposed by the Treasury to repay the Bank of England loan and remove government support

In phase two it would grow its mortgage business by focusing on prime, good quality lending.

The government set 4 February as the deadline for bids for Northern Rock in January. One party, Olivant Advisers, has withdrawn its bid leaving Virgin as the only other bidder.