Feb. 18 (Bloomberg) -- Northern Rock Plc credit-default swaps rose after the U.K. government decided to nationalize the bank rather than choose a private-sector buyer.

Contracts on the Newcastle, England-based lender jumped 20 basis points to 295 at 11:30 a.m. in London, according to CMA Datavision.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net

Last Updated: February 18, 2008 06:53 EST