The UK Government has had to pump another £3bn into Northern Rock to shore up the lender after it announced losses of £585m for the first half of 2008. As part of its half year results, published this week, the lender says due to determination in market conditions the new Government help is needed to ensure it meets regulatory capital requirements.
The Treasury is to convert into ordinary shares its holding of £400m preference shares and will also swap up to £3bn of debt into equity, subject to state aid approval. The results show Northern Rock has reduced its original Government loan by 35 per cent, from £26.9bn to £17.5bn, discounting this new equity swap.
Arrears over three months have more than doubled since the start of the year, from 0.45 per cent to £1.18 per cent, set against a CML average of 1.21 per cent. The lender has also strengthened its senior management by appointing Gary Hoffman as chief executive, Rick Hunkin as chief risk officer, Richard Smelt as human resources director and Andy Tate as director of debt management.