Arnold Makes It a Two-horse Race For Rock

Ailing bank Northern Rock has managed to persuade the former boss of Abbey Luqman Arnold to stay in the running to take over the reins at the bank.

It is anticipated that the struggling bank will announce Arnold has having preferred-bidder status alongside Richard Branson’s Virgin, and they will have equal access to the books. Branson had hoped that Virgin would remain the sole preferred bidder.

After a difficult week, it should come as a relief that the takeover of Northern Rock is a two-horse race, and might give a boost to the share price which sunk close to all-time lows on Thursday after the banked admitted that it had been hit for £281m as a result of the global credit crunch.

Previously Arnold had said that he would take himself out of the running unless Rock chairman Bryan Sanderson agreed to complete the deal by Christmas, but Arnold has agreed to continue talking without such reassurance. There are still concerns in the City that any bidder could struggle to raise cash to fund the deal in the current credit climate.

Rock chief executive Adam Applegarth has stepped down ‘with immediate effect’ rather than stay on into the New Year to complete a strategic review.

On Thursday Northern Rock shares closed at 86p – down 13.2p. The bank is to take a £150m impairment charge from its structured investment vehicles (SIVs) and SIV-lites, which have suffered from the US sub-prime crisis. There is also a further £131m impairment from its collateralised debt obligations.

Applegarth has a contract entitling him to six month’s salary, but will get considerably less than that. Nevertheless he could still get £50,000 a month for the next five months.

Sanderson has changed his mind and will reinstate marketing boss Andy Kuipers onto the main board, and will take over as chief executive. Only a few week ago Kuipers was sidelined as Sanderson cleared out the old regime