Eagle-eyed readers may have noticed a discrepancy in the press releases issued this morning by UKFI and by Virgin on the sale of Northern Rock.
In the UKFI announcement there was no mention of Wilbur Ross, the US billionaire, or his company. By contrast the press release from Virgin Money says explicitly: “The acquisition is funded by an investment consortium led by Virgin Group and WL Ross & Co.”
It seems ministers are keen for Sir Richard Branson to be the smiling face of the deal, rather than the man dubbed by Fortune Magazine the “King of Bankruptcy”.
So who is Ross? He is a very canny financial investor who has made a speciality out of distressed assets. Recently he was part of a consortium which saved Bank of Ireland from full state ownership by taking a combined 35 per cent stake through rights issues: that consortium was made up of Fidelity Investments, Fairfax Financial Holdings and WL Ross & Co.
Mr Ross, who estimates that he and his partners picked up the holding at a 40 per cent discount to nominal book value, said he was “quite excited about it”, according to this recent FT piece on the “vultures circling Europe’s debt mountain”.
Northern Rock has been acquired at a sharp discount to the £1.4bn that taxpayers initially put into rescuing the troubled north-east lender. At face value the UK government has lost £650m, though that should be trimmed to £350m if all goes well.
Ross already has a close relationship with Sir Richard Branson’s Virgin Money, having bought a stake in the company last year.
The US tycoon, known for his corporate turnround investments in steel, oil, banking and utilities, paid about £100m for 21 per cent of the company. Some of this will be used by the company to roll out its own branch network in the UK.
James Lockhart, vice-chairman of WL Ross & Co, meanwhile sits on the board of Virgin Money.
Dan Thomas noted in a piece last year that Virgin Money was likely to bid not only for Northern Rock but also assets being disposed by Lloyds Banking Group.
Mr Ross has a background in private equity investment and a reputation for turning round failing businesses before selling at a profit. WL Ross & Co has struck more than $200bn (£132bn) of corporate deals around the world over the past 30 years.
Its founder is also a very close confidant of Lakshmi Mittal, the steel magnate, and sits on the board of his main company.
It manages funds that own American Home Mortgage Services and has substantial investments in Assured Guaranty, Bank-United and Montpelier Reinsurance. Mr Ross served as an adviser to Bill Clinton when he was US president, while Mr Lockhart served in both of the Bush administrations.
Jim Pickard
Kiran Stacey