February 20, 2008 / 9:58 AM / 10 years ago

N. Rock calls in McKinsey and Rothschild

LONDON (Reuters) - Embattled lender Northern Rock’s new management team is set to hire consultancy McKinsey and investment bank Rothschild to advise it after the bank is nationalised this week, sources close to the situation said.

New Executive Chairman of Northern Rock bank Ron Sandler speaks to journalists during a news conference at their headquarters, Northern Rock House, in Newcastle northern England February 18, 2008. Northern Rock's new management team is set to hire consultancy McKinsey and investment bank Rothschild to advise it after the bank is nationalised this week, sources close to the situation said. REUTERS/Nigel Roddis

The sources said on Wednesday that Ron Sandler, Northern Rock’s new executive chairman, had asked McKinsey to work on a strategy for the bank, battered by a months-long crisis.

Rothschild has a long-standing relationship with Sandler, a veteran troubleshooter who rescued the Lloyd’s of London insurance market, and it is expected also to be formally appointed later this week, when legislation will bring the bank into public ownership, the sources said.

The government announced on Sunday it had decided to nationalise Northern Rock, abandoning a five-month-long attempt to sell the ailing bank to a private buyer.

The bank’s management team, led by former Standard Chartered chairman Bryan Sanderson until the weekend announcement, is also due to face a shakeup, with directors linked to the previous management or to the failed “in-house” rescue plan for the bank set to leave later this week.

One of the sources said Sandler could keep on some directors “for continuity”, but said most were expected to leave.

Paul Thompson, who would have been chief executive under an “in-house” rescue, has said he will stand down once the bank is nationalised. Ian Gibson, senior independent director, is also expected to leave after Sandler announced the appointment of Treasury high-flyer Tom Scholar, Gordon Brown’s former principal private secretary, as an independent director on Monday.

Sources familiar with the bank said it was not yet clear whether Andy Kuipers, who briefly held the chief executive position before returning as a board member, would remain.

Sandler has named as chief financial officer, former Swiss Re executive Ann Godbehere, but he is expected to take longer to name a chief executive.

The chief executive of British Land, Stephen Hester, has been brought in as non-executive deputy chairman.

Britain’s fifth-largest mortgage lender, Northern Rock has borrowed 25 billion pounds from the Bank of England since the credit crisis pulled the rug from under its funding model, which relied heavily on the capital markets.

Northern Rock, the Treasury, Rothschild and McKinsey all declined to comment on Wednesday.

Reporting by Clara Ferreira-Marques; Editing by Quentin Bryar/Richard Hubbard

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