Bank of England loans to Northern Rock may top 26 billion pounds

24 November 2007

Mumbai: British mortgage lender Northern Rock is likely to have
borrowed a further 1.1 billion pounds ($2.3 billion) from the Bank of
England (BoE) in the past week, taking its total borrowings to 26.4 billion pounds, BoE data released yesterday showed.

The figure, which is less than analysts'' estimate of two billion
pounds, is based on the "other assets" category in Bank of England''s weekly statement. BoE''s ''other assets'' include the central bank''s "lender of last resort" support to banks.

Although BoE and Northern Rock have not confirmed the exact nature and the quantum of central bank support to the cash-strapped mortgage lender, latest data indicate Northern Rock has borrowed up to 26.4 billion pounds in emergency funding since September 14.

The total amount being borrowed by Northern Rock has been far higher than market had expected and would be a stumbling block to potential buyers of Northern Rock.

Northern Rock has been engulfed in a crisis forcing the Bank of England step in and offer it emergency loans after it was unable to raise funds in financial markets, and has left the bank searching for a
buyer for all or parts of its business.

A consortium led by Richard Branson''s Virgin Group, investment company Olivant, US buyout firms JC Flowers and Cerberus-GAMC were reported to be interested in buying out Northern Rock.