Northern Rock shareholders seeking compensation
Northern Rock shareholders are to enter the High Court this week demanding compensation to contest the way in which the stricken bank was nationalised in February 2007.
The firm’s biggest former investor SRM Global has brought the case, with RAB Capital
and 150,000 private investors. However, it is not the nationalisation itself that shareholders are contesting, but the way in which the bank’s finances were assessed.
Northern Rock was hit by huge losses from the collapse of the sub-prime mortgage market in the US.
The crisis-torn bank was nationalised after the Government rejected takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group.
According to shareholders, the bank’s finance were treated as if it was already in administration, in effect, making the shares worthless.
A spokesperson for the UK Shareholders Association (UKSA), who are acting on behalf of the Northern Rock’s shareholders, believes that the UK Government confiscated the shares even though there was a good private sector solution on the table which would have enabled Northern Rock to continue as a viable company.
The UKSA has always been of the view that nationalising Northern Rock was unnecessary.
The hearing is expected to last a few days and will provide Northern Rock shareholders an opportunity to argue that the valuation was incorrect, which left shares worthless and investors facing huge losses.