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Monday 25th of May 2009
October 11, 2007

Hedge Funds take stakes in Northern Rock


by Kay Murchie
”Hedge

Northern Rock shares soared yesterday as one of the city’s shrewdest traders, Jon Wood, confirmed he had taken a stake in the troubled bank to more than 4%. Mr Wood remarked that Northern Rock still holds considerable value for bondholders and shareholders.

The shares rose by 66¾p to 273½p as another investor Swedish pension fund Andra AP-Fonden, which now has a 1.3% stake, also bought into the bank.

Mr Wood’s stake is significant because he and other investors like RAB Capital could prevent a takeover of the bank.

Several potential bidders have also added momentum, the private-equity group, JC Flowers, is interested and is currently examining Northern Rock’s books to assess the bank’s financial health in more detail.

Cerberus is also interested but almost certainly only in a break-up. Furthermore, US private-equity firms Blackstone and Apollo both expressed interest in the bank last week.

Northern Rock’s shares were also underpinned when the government said it would extend its guarantee to protect savers who deposited money after September 19. This is likely to make its savings business more appealing to a bidder.

It has also been highlighted that SRM Global Master Fund has been buying CFDs (contracts for difference) with an intermediary which are a bet on a share price going up - at only 199p a share.

SRM was formed 15 months ago by Monaco-based multi-millionaire Jon Wood, an experienced and controversial. He is famous for £100 million Gadget Shop legal case against Sir Tom Hunter, the Scottish billionaire entrepreneur. During the trial, the judge accused Wood of being unreliable, evasive and a very hard and calculating man.

SRM is the second hedge fund to leap into Northern Rock after RAB Capital bought a 6% stake in the crisis-torn bank.

Chancellor Alistair Darling, will today give a statement on banks in trouble and will highlight Northern Rock, which has borrowed £11 billion from the Bank of England.

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