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N. Rock Paid £10m Too Much For A Rugby Stadium

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http://www.telegraph.co.uk/money/main.jhtm...8/cnrock128.xml

Northern Rock bought the grounds of Newcastle Falcons rugby club for almost £15m three weeks before the bank had to appeal to the Bank of England for an emergency loan.

The transaction has come to light because it was recorded in the accounts of the Falcons, which sold its grounds at Kingston Park to Northern Rock on August 17 after struggling to meet its mortgage repayments to the bank. It has been seized on by critics as more evidence of the bank's increasingly desperate acts to bolster its 2007 results.

The transaction - said by analysts to have been at a high price - may also raise eyebrows among the bank's investors, who face getting nothing now Northern Rock has been nationalised, and the Government, which is liable for any losses the bank incurs.

The land value of the Falcons grounds is thought to be about £5m. Northern Rock increased the price it could pay to £14.75m by valuing part of the land for its potential for redevelopment as residential property. Sources have said the decision was surprising as the Falcons have a lease which guarantees they can use the grounds for sports purposes for more than a decade. "Rock bought a debt they could not get much value from for about 12 years," one source said.

However, one benefit to Northern Rock from the transaction was that it allowed it to reduce its provisions for bad debts, benefiting its profit and loss account for 2007.

As the Falcons failed to make mortgage payments, Northern Rock took a provision of about £5m against the possibility that the club's financial collapse. That money was released when it bought the grounds.

Northern Rock said: "The process of buying the ground was agreed months ahead of the onset of the global liquidity problems that affected the company. The ground presented an opportunity to buy a good quality, commercial asset."

Northern Rock would not say how much the Falcons pay in rent to continue to use the grounds. As the bank is now funded by emergency loans from the Government at a penal rate, the acquisition of the Falcons grounds could be costing the bank about £1m a year in interest. Northern Rock would not say how much the club pays in rent. It is not thought to match the bank's interest payment.

Northern Rock would not say whether the bank's whole board agreed to the deal. Rock is an official sponsor of the Falcons and Newcastle United football club.

Northern Rock has delayed publishing its 2007 results and there is a question mark over whether they will be announced now Northern Rock has been nationalised.

However, investors are keen to see the figures in the hope they give more detail on Northern Rock's performance during its crisis-hit second half of the year. Northern Rock wrote almost a fifth of all new UK mortgages in the first half of 2007 against its 7.6pc market share. At the same time, the bank appears to have removed several checks and balances on its lending.

How long before criminal charges are levied against Applegarth and chums?

Still, nice to see that the beneficary was a club that plays the "only sport they play in heaven".

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  • 296 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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