The government looks to be in an increasingly tight bind on Northern Rock. The bank’s shares have not fallen as much as one might have expected given today’s news that all offers came in below the market price. There is speculation that Jon Wood is increasing his stake and preparing to cut up rough, as we know he can.
The government’s best hope may be to find a solution which does not need shareholder approval. Luqman Arnold’s proposal may meet that need but his plan, even more than the others’, would conflict with the aim, stated today by the Treasury, that it wants a deal which gives it the quickest exit and can “maximise certainty of execution”. Alistair Darling (whose stock you would have to short if you could) will make a statement this afternoon around 3.30pm.
Also, things looking bad in the inter-bank market. Libor is up at 6.44 per cent, from 6.39 per cent on Friday. Looks like nobody wants to lend to each other again. Perhaps Goldman saying today that Citigroup might have to take another $15bn hit over next two quarters didn’t help.
Incidentally, the impact of Northern Rock, and rising interest rates, on housebuyers’ sentiment were blamed today by Barratt Developments for a 14 per cent fall in house sales to private buyers this autumn.
The other good story today is that Marius Kloppers, chief executive of BHP Billiton, has apparently told investors in South Africa that he definitely does not plan to sweeten his all-share offer for Rio Tinto with cash. The Takeover Panel might want him to confirm that.