Northern Rock shareholders hostile to sale

by Gill Montia

Story link: Northern Rock shareholders hostile to sale

Northern Rock’s two largest shareholders are calling for a halt to the auction of the mortgage bank.

Hedge funds RAB Capital and SRM Global hold 13% of the bank’s equity between them and their stance could impede the sale process.

According to Jon Wood, head of SRM: “Now is not the time to sell the bank or any part of its operations … we have repeatedly made it clear to the board that this sale process should be stopped. The process has become a farce which is damaging the franchise of Northern Rock and the UK banking system.”

Since approaching the Bank of England for an emergency loan in September, Northern Rock has borrowed at least £23 billion.

The Bank of England is keen to recover some of its emergency funding but Mr Wood believes that the Bank should continue its support.

He describes the current process as one in which “self-interested parties are trying to buy the company on the cheap”.

Philip Richards, chief executive of RAB, has stated that: “The correct response is to give Northern Rock time and to have proven leadership”.

Other institutional investors have expressed concerns that no one in the situation seems to be acting on behalf of Northern Rock shareholders.

Some shareholders are supporting a proposal by Luqman Arnold, former chief executive of Abbey.

Mr Arnold is proposing to buy 10% to 20% of Northern Rock through his investment company, Olivant, and put in place a new management team.

Meanwhile, new statistics by Data Explorers show that UK banks have become less popular with institutional investors.

In the past six months, the proportion of Barclays’ stock held by institutions has fallen by over 8%.

In the case of Royal Bank of Scotland institutional holdings have fallen by 4%; Lloyds TSB by 4% and Bradford & Bingley 7%.