SIR Richard Branson's Virgin Group stonewalled speculation yesterday that one of its leading financial backers for its rescue of Northern Rock might walk away, saying it did not want to "get involved in tit-for-tat" exchanges.
It followed reports that Deutsche Bank, one of the three institutions believed to be lined up to back Virgin Money's bid for the stricken Northern Rock, had "serious issues" with the takeover proposal.
The two other banks Virgin are believed to b
e talking to, to provide a £15 billion funding line to repay the Bank of England, are Royal Bank of Scotland and Citigroup, neither of which would comment.
It was reported that Deutsche had contacted various parties involved in the takeover last week, including Northern and the Treasury, after feeling that Virgin had issued "disinformation" about the level of its involvement.
But a Virgin spokesman said yesterday: "The Virgin consortium and the banks have continued to work on our due diligence [on Northern] throughout the weekend. We have been locked in meetings and are certainly not going to get involved in tit-for-tat responses on things like this [report]. We continue to work hard with our banks to come up with a proposal that benefits all stakeholders."
The Virgin consortium, which was named as preferred bidder for Northern last Monday, includes WL Ross & Co and Toscafund Asset Management, chaired by former Royal Bank of Scotland boss Sir George Mathewson, and is advised by Quayle Munro, the Edinburgh-based corporate finance house.
It faces renewed competition this week, however, from at least two rival bidders. Olivant, the investment group run by former Abbey National chief executive Luqman Arnold, is expected to put its proposal to Northern and the Treasury in the next two days.
And JC Flowers, the private equity giant, is expected to meet the Treasury this week to put forward an amended proposal for Northern after its first did not find favour.
It is believed JC Flowers, which has former Marks & Spencer chairman Paul Myners on board as well as former Alliance & Leicester chief executive Richard Pym, is prepared to pay £15bn upfront to pay off Northern's Bank of England loans - compared with £11bn offered immediately by the Virgin consortium. It is also now prepared to let Northern shareholders share in some of the recovery potential of the bank.
Arnold and his team, meanwhile, are not proposing a takeover bid, but that Olivant takes a 15 per cent stake in Northern, leaving shareholders with the majority of the shares. Virgin would end up with 55 per cent of the bank, by contrast.
Two leading hedge fund investors in Northern, SRM Global with 9 per cent and RAB Capital with 7 per cent, are understood to be opposing Virgin's status as preferred rescuer because they consider the offer too cheap. RAB Capital has called Virgin's offer price "cheeky".
Unconfirmed reports say Jon Wood, who runs SRM, is considering putting a proposal to the Northern board based on a rights issue that he would underwrite himself. SRM was not returning calls yesterday.
Virgin has proposed injecting £1.3bn into the bank brought low by the credit crunch in wholesale financial markets, with half being raised through a rights issue at 25p a share.
The full article contains 552 words and appears in The Scotsman newspaper.
