Restructuring & Reorganization
Selected Transactions

October 2007

Company Description
Northern Rock is a UK-based bank specialized in residential mortgage lending.  The company provides secured residential and commercial lending and unsecured personal finance in the UK, distributes residential mortgage and retail savings products through a network of approximately 72 branches, and sells third party insurance products.

Situation Overview
Due to the reallocation of capital away from short-term debt, in particular commercial paper, Northern Rock was forced to borrow heavily from the Bank of England in order to refinance its maturing obligations.  A subsequent run on the bank’s retail deposits led to Government intervention in the form of a guarantee of senior unsecured obligations.  The continued lack of liquidity in the wholesale funding market and the massive reduction in retail deposit funds made the bank dependent upon the Bank of England’s continued support for survival.

Transaction Summary
Blackstone was appointed as the Company’s lead restructuring adviser and co-adviser on M&A options to the Company in October 2007.  Blackstone’s appointment re-invigorated Northern Rock’s deal process via Blackstone’s unique restructuring expertise.  The assignment included an independent and realistic assessment of restructuring and refinancing opportunities.  Blackstone also advised the Company in the development of a business plan for a credible standalone restructuring solution and led negotiations with other key stakeholders including the Tripartite Authorities (the Bank of England, Her Majesty’s Treasury and the UK Financial Services Authority) and ratings agencies.  Additionally, Blackstone advised on State Aid issues using prior restructuring experience and delivered an integrated deal process, coordinating a highly complex and fast-moving distressed situation.  Ultimately, the UK government selected Temporary Public Ownership for Northern Rock after a comprehensive review of strategic options, but Blackstone’s extensive work underpins the current business plan.

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