Another day, another Northern Rock post. But this time the news has an air of reality. After Friday’s boardroom clear-out and the tabling of eight or more putative bids, the former mortgage bank on Monday published an update on its strategic review.
THE highlight:
While further analysis and discussion of the proposals is required, based on the information it has so far, the Board of Northern Rock believes that the range of values for the existing equity implied by the proposals is materially below the market price at the close of business on Friday, 16th November 2007.
Other notables included Rock assertion that it expects to receive further expressions of interest in the next few days, while those proposals already tabled fall into two camps:
(i) proposals to invest in the Company (including through an injection of assets as well as new capital); and
(ii) proposals to acquire parts of the business or assets of the Company.
Meanwhile, stung perhaps by the reaction to That Memo 
, HM Treasury released its own statement, which includes a “statement of principles.”
Operative paragraph No 1:
Interested parties should not assume at this stage that the current Bank of England loan facilities will be available beyond either any sale or the expiry of the facilities in February. However, the Authorities are willing to discuss any proposals made; any proposal that envisages an ongoing role for the Authorities, beyond their usual statutory and regulatory functions, will be evaluated on its merits against the Authorities’ stated objectives. The Authorities expect the costs and risks associated with Northern Rock to be borne to the greatest extent possible by the current and future private sector providers of capital. The allocation of costs and risks between any new investor or purchaser and Northern Rock’s current providers of capital will be a matter for negotiation between the board of Northern Rock and the investor or purchaser. Other things being equal, the Authorities will view favourably proposals that minimise any residual involvement or funding from the public sector.
Operative paragraph No 2:
HM Treasury will be prepared to provide limited factual confirmations relating to its own role, including limited factual confirmations in relation to the State Aid process, but does not expect that any successful proposal will include any representations, warranties or indemnities from any of the Tripartite Authorities to Northern Rock, any investor or purchaser or any debt or equity providers.
Operative paragraph No 3:
The Tripartite Authorities attach considerable importance to certainty of execution, and will assess proposals in relation to any pre-conditions, risks or approval requirements that could threaten execution within the envisaged timeframe and deal parameters.
And just in case you didn’t get that:
The Tripartite Authorities expect the equity and debt commitments supporting any proposal to be obtained on a basis which ensures that the terms and conditions attaching to such commitments (including as to conditions to drawdown and termination rights) maximise certainty of execution. This degree of certainty should be reflected in the terms of any proposal.
Meanwhile, trading in Rock stock was predictably volatile on Monday. But rather than the price, say, halving on news that potential bidders have put in offers “materially” below the current market price, the damage to Rock’s quote was limited to 12 per cent during the first half hour of trading.