Northern Rock could still owe the Bank of England billions of pounds in three years’ time, according to a confidential sales memo. Financial Times, Daily Telegraph The Times
The memorandum, obtained by the Financial Times’ Alphaville website, is now the subject of a court injunction after Northern Rock sought to prevent publication of its details.
The High Court granted a limited injunction preventing further reporting of material, but it rejected a much more sweeping prohibition sought by the bank.
The document suggests that even if the company was bought outright, the Bank may have to provide support to Northern Rock until 2010 when Northern Rock could still be drawing down £6bn.
The memorandum discloses that Northern Rock expects to have borrowed an estimated £24bn from the Bank of England by January 1 2008. Northern Rock is thought to have borrowed about £20bn from the Bank so far.
The London Stock Exchange yesterday signalled a crackdown on hedge funds and other speculators that break the rules by short-selling Northern Rock shares without ensuring that they have the stock to sell in the first place.