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Northern Rock proposals “materially below” market price for the lender

The proposals for Northern Rock submitted last Friday are materially below the market price for the business, causing shares to fall by 16 per cent this morning.

Northern Rock issued a statement this morning which says that it has received indicative expressions of interest covering a range of options for the business. It says it also expects to receive further expressions of interest in the next few days.

The lender’s advisors have begun discussions with interested parties to clarify their proposals in order to allow the board to consider and identify the most appropriate course of action for the company and its stakeholders.

It points out that it continues to engage in discussions with refinanciers to explore refinancing or reorganisation solutions for the lender.

The proposals received by Northern Rock so far are of two types. Proposals to invest in the company and proposals to acquire parts of the business or assets of the company.

A Treasury statement was also released which said that potential bidders for the business could not be guaranteed the Bank of England’s loans past February. But it signalled that it would listen to bidders’ proposals and decide on any further measures.

Treasury officials are currently in discussions with the European Commission over whether they can extend the emergency loan past February without falling foul of European laws on state aid.

The Treasury statement says the help given to Northern Rock does amount to state aid and will need to be approved by the EC.

The Northern Rock statement says that the value to shareholders from any of the proposals remains highly uncertain and will be dependent, among other things, on when and if there is an improvement in market conditions including access to liquidity and the value created, if any, from the run off of the assets and liabilities remaining in the company following any disposal of all or part of its business.

It says that implementation of any such proposal will also require the approval of the Tripartite Authorities, acting in accordance with their publicly stated objectives.

The strategic review will be completed by February 2008.

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