Stricken Northern Rock bank hit by 'fire sale' rumours
LONDON (AFP) — Shares in troubled British bank Northern Rock fell on Wednesday, reversing earlier gains amid rumours of a discount sale of the company's assets.
Shares in the bailed-out mortgage lender were down 16.01 percent at 257 pence at the close, having at one point dipped to as low as 246.25 pence. The overall FTSE 100 index was up 2.81 percent.
"In terms of any potential fire sale, the rumour currently circulating is that it is going to be at a lower level than the share price is," said Richard Hunter, analyst at brokerage Hargreaves Lansdown.
"My intelligence is that there are rumours circulating in the market that Lloyds TSB were prepared to pay no more than 2.0 pounds a share for Northern Rock, and HBOS 1.0 pound a share."
Hunter added: "The best outcome for Northern Rock -- the brand having been damaged in the way it has -- would be to be acquired."
"Clearly any acquirer is going to get Northern Rock for a fraction of the cost of just a few months ago. Northern Rock peaked this year at about 1,250 pence.
Britain's fifth-largest mortgage bank had been hit with a wave of withdrawals by nervous depositors earlier this week on news that it had to be bailed out by the Bank of England, victim of a global credit squeeze.
Northern Rock said in separate filings on Wednesday that its two biggest shareholders, Lloyds TSB and Scottish asset management company Baillie Gifford, had reduced their holdings.
Baillie Gifford said its voting rights had now fallen below 5.0 but did not give a specific figure. It previously held 5.98 percent.
Lloyds TSB said its voting rights had dropped to 3.9 percent from 4.69 percent.
The news stoked fresh market speculation over any potential takeover of Northern Rock, analysts said.
Lloyd's TBS declined to comment on rumours it could be interested in a takeover when questioned by AFP, while a source close to the dossier said the bank had no intention of making an offer.
Another source questioned by AFP said HBOS did not plan to make a bid for Northern Rock either.
Meanwhile, Northern Rock disclosed in a note to the London stock exchange authorities that German bank Deutsche Bank had last Friday acquired 3.64 percent of its capital.
The fresh share price fall came despite gains across most of the London stock market following a deep US interest rate cut.
Northern Rock stock had regained 8.22 percent on Tuesday after slumping by 55 percent in value over the course of Friday and Monday.
While anxious savers rushed to withdraw their cash from Northern Rock's branches across Britain on Friday, Saturday and Monday, the sense of panic appeared to ease on Tuesday after the British government vowed to protect all savings deposited at the bank.
