Three US hedge funds apparently have targeted beleaguered British mortgage bank Northern Rock. They plan to buy it and break it into pieces, leaving the company’s stock holders with almost northing, according to The Sunday Telegraph. "The proposed deal would see the funds divide up Northern Rock’s mortgage book, worth more than £100bn."
The deal may be able to get done because none of the large UK banks are willing to take the risk of buying Norther Rock due to the turmoil in the mortgage markets. But, "the hedge funds believe they could acquire Northern Rock’s mortgages at below face value and make huge profits by holding them until they mature."
The three fund involved are one controlled by Chris Flowers, the former Goldman Sachs banker, Cerberus, and Citadel.
Douglas A. McIntyre