The Wall Street Journal-20080114-U-K- Enlists An Executive To Aid Lender
Return to: The_Wall_Street_Journal-20080114
U.K. Enlists An Executive To Aid Lender
LONDON -- In a sign the U.K. government is preparing for a possible nationalization of troubled mortgage lender Northern Rock PLC, it has enlisted a senior insurance-industry executive to help run the company, a person familiar with the situation said.
Ron Sandler, former head of Lloyd's of London insurance market, will be "involved" with Northern Rock if the mortgage lender is nationalized, the person said, adding that he hasn't been "officially hired." Mr. Sandler couldn't be reached for comment. The person said that while a private purchase is the government's aim, that may prove "a little bit difficult" in the current environment.
Northern Rock in September became the target of the U.K.'s first bank run in more than a century, after turmoil in credit markets forced it to turn to the Bank of England for emergency funding. A consortium led by Virgin Group Ltd. has since emerged as the preferred bidder, though a rival proposal from private investment firm Olivant Advisors Ltd. is favored by some shareholders.
The government's move to recruit Mr. Sandler comes as some investors -- including two hedge funds that together control more than 18% of the shares -- have been demanding more say over Northern Rock's future ahead of an extraordinary shareholders' meeting tomorrow. Proposals put forth by the two funds -- SRM Global Master Fund and RAB Special Situations, funds of Monaco-based SRM Advisers and London's RAB Capital PLC -- would give shareholders the right to veto certain decisions by the mortgage lender's board, such as significant asset sales or new share issues. A private takeover of Northern Rock would likely require the issuance of new shares, which would severely dilute holdings of existing shareholders.
A spokeswoman for Northern Rock said the company "continues to focus on a private solution and discussions continue with third parties." She wouldn't comment on the potential appointment of Mr. Sandler, saying it was a matter for the U.K. Treasury.
