hmmmm... And some more good news for shareholders (NOT);
LONDON -(Dow Jones)- Shares in troubled mortgage U.K. lender Northern Rock PLC (NRK.LN) were expected to come under pressure Thursday following a report that independent investment group Olivant Advisors had threatened to withdraw its rescue plan for the bank.
Key Northern Rock shareholders have backed Olivant's proposal, that would see it take over management of the bank in return for a stake of around 15%.
The lender's shareholders, including SRM Global Master Fund Ltd. Partnership, which has a 9.1% stake, and RAB Capital PLC (RAB.LN), which has 6.66% stake, said the plan was better for shareholders than a bid from a consortium led by Virgin Group that's supported by Northern Rock's current management.
BBC News reported on its Web site late Wednesday that Olivant is threatening to abandon its plan and accused Northern Rock of frustrating its attempts to negotiate a massive line of credit with Citigroup Inc. (C) and Deutsche Bank AG (DB).
It said Olivant also wants its team to take over Northern Rock's management with immediate affect. Unless the demands are met, Olivant has said it will walk away from the rescue attempt, according to the BBC.
At least four groups initially put forward proposals to bail out Northern Rock, including U.S. private equity groups JC Flowers & Co. and Cerberus Capital Management LP. Both have now dropped out of the running.
Nobody was immediately available to comment at Olivant or Northern Rock.
Northern Rock shares may also come under pressure from news that it will drop from the FTSE 100 blue-chip index following the recent sharp decline of its market capitalization.
Northern Rock collapsed in September after wholesale money markets - the mortgage bank's main source of funding - dried up. It's been courting potential bidders since then, mainly from private equity companies and has relied of emergency funding from the Bank of England.
To date it has borrowed an estimated GBP25 billion from the BoE.
Its shares closed at 99.2 pence on Wednesday, giving the business a market value of around GBP420 million. The shares had been worth 639 pence on Sept. 13, the day before Northern Rock said it had turned to the BoE for help.
Analysts said FTSE 100 tracker funds will have to sell Northern Rock shares when the market opens Thursday. However, they said most trackers focus on the FTSE All-Share index and that downward pressure on the stock could also be mitigated by buying from active investors.
Virgin said it would immediately repay GBP11 billion of the money Northern Rock has borrowed from the BoE.
Under the terms of the proposal, Virgin would end up with a 55% stake in the bank.
The U.K. Shareholders Association (UKSA), representing 4,000 Northern Rock shareholders also supported Olivant.
Olivant plans to name former Abbey National chief executive Luqman Arnold as Northern Rock's executive chairman and initially to pay back GBP10 billion to GBP15 billion of money owed to the BoE.
However, both plans depend on GBP15 billion in funding that has yet to be agreed by Citigroup, RBS and Deutsche Bank.
The Sunday Telegraph reported on Dec. 9 that the banks had refused to sign off on any bailout deal until at least the New Year. The report said they wanted the loans backed by better quality assets than those the BoE had accepted.
This reported hitch prompted speculation that Northern Rock may have to be nationalized or broken up in order to protect depositors
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