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December 24, 2007    

Emergency meeting for Northern Rock

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by Kay Mitchell

Struggling Northern Rock has announced that an emergency meeting for shareholders will be held on 15 January 2008 to discuss its sale process.

Hedge funds RAB Capital and SRM Global, the bank’s major shareholders are calling for restrictions on the bank’s ability to sell the company’s assets or issue new shares. However, Northern Rock said their proposed resolution would obstruct a rescue of the bank.

The two major shareholders have a combined stake of over 16% in Northern Rock. They have requested that shareholders should have the power to block any moves to sell more than 5% of Northern Rock’s assets, issue large chunks of new shares, or buy any assets.

The bank’s chairman, Bryan Sanderson, is urging shareholders to vote against the restrictions. He said ‘I believe that these resolutions are unnecessary and, in view of the difficult and challenging circumstances currently affecting the company, potentially damaging.’

So far, there are 2 main bidders for the bank who include a consortium led by Sir Richard Branson’s Virgin Group and Olivant, run by Luqman Arnold, former Abbey chief executive.

Last week, it was reported that Bradford & Bingley had approached Northern Rock about buying its assets. The buy-to-let specialist is not looking to buy Northern Rock in its entirety but could possibly do a deal with either of the consortia seeking to rescue the firm.

Some politicians and analysts believe nationalisation of the bank or some form of public administration may be the best option but last week, the British Bankers Association (BBA) said the possibility of the firm being nationalised was not ‘a happy proposition’.

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