Citigroup Offer Lifeline Loan To Northern Rock

Mon, 08 Oct 2007

Northern Rock have been offered a lifeline in its bid to survive as an independent group following reports that US banking giant Citi are prepared to bail out the UK lender .

Citi, the world’s largest bank, is understood to be prepared to lend the Newcastle-based bank between £5 billion and £10 billion to help ease its funding crisis, according to newspaper reports.

Although the exact terms of the deal are still being decided upon, the funding would enable the stricken mortgage group to stop borrowing at the Bank of England's emergency rate – believed to be around 7 per cent.

The multi million pound loan would also enable Britain’s fifth biggest mortgage lender to continue to operate as an independent group, fending off interest from potential bidders in the process.

Citigroup was originally appointed, alongside Merrill Lynch, to advise Northern Rock on a sale and had previousley been seen as a possible provider of funds to support a potential bidder for the lender.

Last week saw New York-based private equity firm JC Flowers raise £15 billion in its attempt to mount a bid for the bank .

The fund's chief executive Chris Flowers, who specialises in distressed takeovers of financial firms, is understood to have gained funding commitments from JP Morgan, Credit Suisse and Wachovia in a bid to keep the British lender intact.
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