Monday, 4 February 2008
No Olivant branch for Northern Rock
In addition to the poor pun; this is quite bad news for the government and taxpayers. Olivant was the financial engineering bid, the one that would make the numbers add up before all else.
Branson's bid has a big element of investing faith in the Virgin brand to make a turnaround. We know that this does work spectacularly sometimes, but there are a quite number of failures on the route too. I don't see too many crowing about the Virgin Media success story.
As for the idea that the current Northern Wreck management will be allowed to run with their own ideas is very unpalatable. Politically, I cannot see how this would work and surely at this point the Government would rather nationalise.
So this leaves Branson in a great negotiating position as the only true bidder. If he pushes to hard no doubt we will be back to a nationalisation programme - however his fantastic track record of slick negotiation means I will be sticking with my prediction that Virgin Money will take-over Northern Rock.
What I can't attest to is whether its rather optimistic business plan will stand-up in the medium term and ensure taxpayers get their money back. The treasury is going to have to get up to some serious off-balance sheet accounting to hide this mess for years to come.
Posted by CityUnslicker