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Citibank £10billion Loan Facility and Potential Take Over of Northern Rock Bank

Companies / Corporate News Oct 07, 2007 - 06:07 AM GMT

By: Phillipa_Green

Companies Citibank in prelude to a potential take over bid for Northern Rock bank agreed to provide the troubled bank with a £10 billion loan facility.


Northern Rock had already borrowed more than £10billion from the Bank of England at penal rate of more than 6.75% interest rate as the bank had been hit hard by the credit crunch which caused the liquidity in the interbank money markets to dry up overnight. This was further exacerbated by the run on Northern Rock bank during September which was only halted when the Government agreed to secure 100% of the first £100k of savings in Northern Rock Bank (Northern Rock Savings 100% UK Government Guarantee).

The loan from citibank will strengthen Northern Rock as a potential bid target as the rate charged by Citibank will be inline with the interbank rate of 6.25%, which has declined as liquidity returns to the interbank market in recent weeks as a consequence of the Fed rate cut and huge amounts of liquidity provided to the European banks by the ECB.

Northern Rock's advisers had already been in talks with US buyout firm JC Flowers and US firm Cerberus as potential rescuers. The battered Northern Rock share price had been bouyed by takeover speculation and had risen to £1.59 on Friday after trading as low as £1.12 earlier in the week. Further gains are expected in tommorrows trading.

By Phillipa Green
(c) Marketoracle.co.uk (Market Oracle Ltd) 2005-07. All rights reserved.

The Market Oracle is a FREE Daily Financial Markets Forecasting & Analysis online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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