FTAdviser.com

Tesco emerges as potential bidder for Northern Rock

Story by: Gemma Westacott
Magazine: FTAdviser
Published Wednesday , July 01, 2009

Tesco has emerged as a potential bidder for Northern Rock, after further details of how the troubled lender is to be split into two emerged late last week.

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According to reports in The Times newspaper, the supermarket chain has shown provisional interest in buying the bank.

Several private equity firms and Virgin are also thought to have also shown interest.

Virgin Money was one of the interested parties for Northern Rock before it was nationalised last year. It is again believed to be interested in buying some of the healthier parts

In late April the government announced plans to split Northern Rock into a good and bad bank, although the European Commission is still investigating the UK's proposed state aid package for the business.

Last Friday, Northern Rock confirmed that under the plans the lender will be split into two separate entities - 'BankCo' and 'AssetCo'. (See story.)

'BankCo', which will be regulated by the Financial Services Authority (FSA), will hold retail deposits, some wholesale deposits and a proportion of Northern Rock's unencumbered mortgage assets, together with the lender's branches and mortgage origination capability.

'AssetCo' will hold the balance of the existing residential mortgage book, including those allocated to the Granite securitisation and covered bond programmes. It will also hold the existing government loan to Northern Rock, plus Northern Rock's wholesale funding instruments.