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Virgin Money repays Treasury for Northern Rock loan

by: Samantha Partington
  • 25/07/2014
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Virgin Money repays Treasury for Northern Rock loan
Virgin Money is buying back the government's £154.5m stake in Northern Rock plc making it the sole owner of the previously troubled lender.

When Virgin Money bought Northern Rock plc, the Treasury received £747m cash and £150m of Tier 1 capital notes on completion of the deal, plus a further £73m cash six months later.

Virgin is raising the finance by issuing £160m of Tier 1 capital notes, a capital raising instrument, to repay the Treasury’s finance package for the acquisition in 2012.

Jayne-Anne Gadhia, chief executive at Virgin Money, said: “The issue of the new Tier 1 capital notes marks Virgin Money’s inaugural access to the unsecured debt capital markets.

“Investor feedback was very positive and the transaction was comfortably oversubscribed representing a significant vote of confidence in Virgin Money.”

Gadhia said the investor support reflected Virgin Money’s strong balance sheet, its conservative approach to capital and liquidity and the strong and profitable growth delivered in its core business.

Following the collapse of Northern Rock in 2007, the bank was split into two parts; Northern Rock Asset Management (NRAM) and Northern Rock plc.

NRAM, referred to as the ‘bad bank’, kept hold of the toxic mortgage loans which customers were struggling to repay or were on high loan-to-value deals. 

Meanwhile Northern Rock plc was refocused on ‘conservative’ new  mortgage lending and savings accounts under the Virgin Money brand.

Since January Virgin Money has increased its mortgage book by over 40% to exceed £20bn, which it said is ‘significantly’ ahead of market growth.

George Osborne, on a visit to Virgin Money’s head office in Newcastle, congratulated the lender on its progress since acquiring the bank and welcomed the announcement that Virgin Money was creating 200 new jobs.

The Chancellor said: “A key part of the government’s long term economic plan is to increase competition in Britain’s banking system so that consumers have more choice and get a better deal.

“This includes wide-ranging action to support new and smaller banks so it’s fantastic to see a market challenger like Virgin Money growing, launching new and different products, and creating more jobs here in the North East.”


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