Northern Rock 'positive' despite emergency loan

Fiona Ellis, director of the Northern Rock Foundation insisted she was "feeling relaxed and positive" about the grant maker's future, despite its parent organisation, the Northern Rock bank, being forced to apply to the Bank of England for an emergency loan last night.

The bank was forced to apply to the central bank in the latter’s capacity of lender of last resort after the troubles in the financial markets that began with the American sub-prime mortgage crisis last month left it short of capital.

But Ellis said that the reserves held by the foundation – whose expenditure in loans and grants to charitable causes was nearly £29m in 2006 – would allow it to “smooth things out”.

“Our covenant entitles us to 5 per cent of Northern Rock profits every year,” she said. “That has allowed us to give away £155m over the past 10 years. Even with the reduced profits predicted for this year, Northern Rock will still be one of the biggest corporate givers in the UK.”

She said that if the bank ever chose to break the covenant and reduce its level of donations, the foundation would be entitled to cash a 15 per cent shareholding in the company, which currently lies dormant.

“The founders of the foundation made good provision for us,” she said.

However, she refused to comment on speculation that the foundation might not be able to claim the full 15 per cent shareholding in the event of a takeover of Northern Rock.

“We don’t know what the circumstances would be,” she said.

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