Shareholders in Northern Rock remain in the dark

| March 7, 2008
”Shareholders

Shareholders in Northern Rock are in the dark as to when and how they might receive any compensation.

The crisis-torn bank was nationalised last month after the Government rejected takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group.

It was revealed earlier this week that Jon Wood, the fund-manager behind SRM Global with a 12% stake in Northern Rock, is expecting to launch legal proceedings against the Government and smaller investors are positioning to claim a fair price for their shares as well.

David Greene, partner at law firm Edwin Coe, said he has pulled together about 7,000 small shareholders and they are considering action, but the process is unclear.

The Government took Northern Rock into public ownership on February 22. Compensation for about 180,000 shareholders will be set by an independent valuer named by the Treasury, who ‘must assume that the company is unable to continue as a going concern‘. That is expected to mean little or nothing is paid for the shares.

It is expected that investors will challenge whether the Government’s decision to nationalise the bank was reasonable and the assumptions the Government has set for the valuer of the shares.

Mr Greene said the Government shouldn’t effectively tie the valuation to a low value or nil value. That’s up to the valuer.

SRM is expected to take the lead in terms of legal action. Its lawyers, White & Case, declined to comment.

SRM, together with RAB Capital, the bank’s two largest shareholders, face combined losses of approximately £170 million following the nationalisation.

Former Lloyds of London boss, Ron Sandler, is currently in charge. Mr Sandler and the rest of the team are involved in a plan to revive the struggling bank.


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