Abu Dhabi cash to back UK bank sale

Sir Richard Branson's Virgin Money is to acquire Britain's Northern Rock bank in a £747 million deal backed by Abu Dhabi-linked investors.

Virgin Money had tried to buy Northern Rock before it was nationalised in February 2008 and restructured into a smaller bank. AP Photo

Sir Richard Branson's Virgin Money is to acquire Britain's Northern Rock bank in a deal backed by Abu Dhabi-linked investors.

The UK Treasury said yesterday it would sell the bank to the British magnate for £747 million (Dh4.3 billion) after taking over the mortgage lender in 2008. The deal represents a significant loss on its original investment.

Stanhope Investments,a fund based in Abu Dhabi, is one of Virgin's investors. A Virgin Money spokesman confirmed that Stanhope Investments was one of the backers of the deal but declined to give details.

It is the first sale by the UK government since it rescued four lenders after they ran up big losses during the financial crisis.

"The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks," George Osborne, the chancellor of the exchequer, said in a statement.

"It represents value for money, will increase choice on the high street for customers, and safeguards jobs in the North East."

Stanhope Investments is a Cayman Islands-registered company owned by the Abu Dhabi Investment Council (Adic), according to a recent prospectus from Pakistan's utility Pacgen, in which ADIC is an investor. Adic was unavailable for comment.

Funds based in Abu Dhabi have been tipped to renew investment ties in the UK financial sector with the process of banking re-privatisation.

Virgin Money had tried to buy Northern Rock before it was nationalised in February 2008 and restructured into a smaller bank. In January last year, Northern Rock, the consumer bank, separated from Northern Rock Asset Management, which is closed to new customers. At the same time, the government sank £1.4bn of capital into the unit.

"The return of Northern Rock to the private sector has always been one of our key objectives. We said that this would be done at the right time and when there was a proposition in the best interests of taxpayers and other stakeholders," said Ron Sandler, the executive chairman of Northern Rock.

UK Financial Investments, the government body that managed the holding, said it may receive as much as £1bn over time. The additional cash would come from a further £150m in Northern Rock bonds it will hold as well as a pledge of money if the bank is sold or floated for a profit within the next five years.

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