To ask Her Majesty's Government further to the answer by Lord Davies of Oldham on 27 January (Official Report, 27/1/10; col. 1485) saying that "all creditors [of Northern Rock (Asset Management)] will indeed be paid in full as and when liabilities mature", what is the position of undated bond holders; and whether they will receive interest.
Lord Davies has written to Baroness Noakes clarifying the answer he provided about the position of creditors in Northern Rock (Asset Management) plc. A copy of that letter has been placed in the Libraries of both Houses.
When Lord Davies referred to "all creditors would be paid in full" he was referring to individuals and organisations that are covered by the Government's wholesale guarantee arrangements in respect of Northern Rock (Asset Management) plc that were restated on
unsecured and un-subordinated borrowings of Northern Rock (Asset Management); amounts owing by Northern Rock Covered Bond LLP; and unsecured wholesale depositors.
The guarantees arrangements are subject to various exclusions from scope, including exclusions for securities issued pursuant to Northern Rock (Asset Management) plc's "Granite" securitisation programme. The guarantee arrangements in respect of covered bonds are currently under review. Otherwise, the guarantee arrangements will continue until the wind down of Northern Rock (Asset Management) plc is completed. The Government has provided a working capital loan facility to Northern Rock (Asset Management) plc, currently up to £2.5 billion, to ensure the orderly wind-down of the Company and that it meets its contractual liabilities. A copy of the full terms of the guarantee arrangements are available from the Treasury website.
The Government's present intention is that Northern Rock (Asset Management) plc will be sufficiently capitalised to meet its FSA regulatory capital requirements. To this end, the Government has provided a commitment to the FSA that up to £1.6 billion in additional capital support will be provided to Northern Rock (Asset Management) plc should the need arise. Beyond that, its position will be kept under review in the light of its financial performance.