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Northern Rock shares on the up

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Written by:
22/01/2008

Beleaguered bank Northern Rock’s shares rose by 36% in early afternoon trading yesterday, according to online broker The Share Centre.

Shares in the bank jumped following the Treasury’s announcement that it plans to convert the £25bn loan issued to the bank by the Bank of England, into bonds. The bonds would be guaranteed by the Government and would be sold on to investors, which would reduce the risk of nationalisation.

The plan, which has not yet been approved by the European Commission, is hoped to increase the chances of finding a private bidder for the bank, the deadline for which has been extended to 4 February 2008.

Andy Parsons, spokesperson for The Share Centre, said: “The success of the Government’s proposal to restructure Northern Rock’s debt in this way remains to be seen. Quite simply, it will depend on whether potential suitors feel this new initiative is one they can work with as they would no longer have to shoulder the burden of the loans outstanding.

“We still feel that Northern Rock is an extremely high risk investment. We are advising investors who already hold shares to continue to hold, while those new to investing should seek individual advice.”

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