Government Extends Northern Rock Guarantee Arrangements

by Philip Morton, Investors Offshore.com

19 December 2007

The UK's Treasury on Tuesday confirmed that the guarantee arrangements for Northern Rock are being extended, at the bank's request, to the following unsubordinated wholesale obligations, whether now existing or arising in the future:

  • All uncollateralised and unsubordinated wholesale deposits and other borrowings which are outside the guarantee arrangements previously announced by HM Treasury;
  • All payment obligations of Northern Rock plc under any uncollateralised derivative transactions;
  • In respect of all collateralised derivatives, and all wholesale borrowings which are collateralised (including, without limitation, covered bonds of Northern Rock plc), the payment obligations of Northern Rock plc to the extent that those obligations exceed the available proceeds of the realised collateral for the relevant derivative or borrowing; and
  • All obligations of Northern Rock plc to make payments on the repurchase of mortgages under the documentation for the "Granite" securitisation programme.

Previous announcements have created guarantee arrangements for all unsecured retail products of Northern Rock plc and many of its wholesale deposits and borrowings. This announcement extends these arrangements to a wider range of wholesale products.

No change is being made to the guarantee arrangements in respect of retail deposits of Northern Rock plc, which remain fully protected under the announcements previously made by HM Treasury. Northern Rock plc will pay an appropriate fee for the extension of the guarantee arrangements.

As previously announced, the arrangements to protect retail and wholesale depositors of Northern Rock plc will remain in place during the current instability in the financial markets. Reasonable notice, which will not be less than 3 months, will be given by HM Treasury of any termination of these arrangements.

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