Virgin Money flotation pushed back

Tuesday 21 October 2014

Virgin Money has pushed back its plans for a £2 billion flotation after the shares offer was hit by recent turbulent market conditions.

The Newcastle-based lender had expected its initial public offering (IPO) to take place this month but now admits the sale will happen "as soon as constructive market conditions allow".

The move comes after a collapse in investor confidence in the world economy caused the FTSE 100 Index to slump by more than 9% since the beginning of September. Earlier this week UK challenger bank Aldermore ditched its £800 million initial public offering, and Scottish construction firm Miller also dropped plans to list its housebuilding division last week. However, designer shoe brand Jimmy Choo defied sliding market conditions and saw through its £545 million float today, albeit at the bottom end of its pricing range.

Virgin Money chief executive Jayne-Anne Gadhia said: "Virgin Money continues to perform strongly and we remain focused on delivering a successful initial public offering as soon as market conditions allow."

The lender, which provides mortgages, savings and credit cards to 2.8 million customers, said this month it plans to float at least 25% of itself to investors. The business is reportedly expected to be valued at up to £2 billion. A flotation will eventually see £50 million returned to the taxpayer as part of its agreement to buy Northern Rock in 2011. The bank bought former failed lender Northern Rock from the Government for an initial £820 million.

Virgin said the latest contribution as a result of the flotation would take the total paid to the Treasury to £1.02 billion, adding that it intends to use the £150 million it plans to raise to grow the business in a number of areas, including boosting its share of the UK mortgage lending market to over 3%, and lifting its credit card lending from £1 billion to £3 billion by 2018.

The lender employs more than 2,500 staff, with 1,700 based in Gosforth, Newcastle, and 200 in Norwich. It is owned by Sir Richard Branson's Virgin Group, Wall Street billionaire Wilbur Ross and an Abu Dhabi investment fund.