Rock shareholders challenge bosses
Jan 9 2008 by Paul James, The Journal
NORTHERN Rock’s biggest shareholder has issued a rallying call urging others to support its bid to stop the bank’s bosses acting without their consent.
Monaco-based hedge fund SRM, which owns 10% of the bank, has today taken out an advert in The Journal calling for support to make sure “assets of the company are not disposed of without shareholder approval”.
Rock chiefs announced an Extraordinary General Meeting last month after SRM, along with the bank’s second biggest shareholder, hedge fund RAB Capital, put forward a series of resolutions they claim will protect the interests of shareholders. On announcing the meeting, which takes place on Tuesday, Northern Rock chairman Bryan Sanderson urged investors to reject the proposals, saying they could damage the recovery of the business.
RAB and SRM want shareholders to be asked for approval before the board sells more than 5% of Northern Rock’s assets or issues large chunks of new shares.
It came in response to the potential buy-out from Virgin Money being made public, in which a massive amount of new shares would be issued to raise money, but potentially halving the current value of existing shares.
Mr Sanderson claims the move would restrict the power of the board to act “at a time when prompt, decisive action may be required”, and hinder its ability to negotiate.
But the SRM advert today says: “The resolutions do not prevent any deal to save the company, nor do they make the board’s task in the current circumstances more difficult.
“The resolutions simply reflect best practice and, if passed, will ensure that all shareholders, as owners of the company, are consulted and the assets of the company are not disposed of without shareholder approval.”
Yesterday, Robin Ashby, founder of the Northern Rock Small Shareholders Group, urged fellow shareholders to vote, indicating that he would be supporting the resolutions put forward by RAB and SRM.
And the Northern Rock Shareholder Action Group, set up by the UK Shareholders’ Association, is also backing the two hedge funds.
Meanwhile, Philip Richards, chief executive of RAB Capital, has said he may challenge the board of Northern Rock publicly at the general meeting.
Mr Richards said, in a letter sent to other investors, that the political situation was overshadowing the fact that the bank remained owned by shareholders, and that the stakeholders were being ignored.
Northern Rock shares closed last night up 5p at 89p. At their peak last year they reached £11.98.
The SRM advert is on Page 16 of today’s Journal.
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Help groups caught in crisis, says MP
Cumbrian MP Tim Farron has tabled a Commons motions expressing concern about a cut in the funding budget of the Northern Rock Foundation from £22m in 2007 to £7m for 2008 and the impact on culture in the county.
The motion from the Westmorland and Lonsdale MP also highlights the threat to “excellent” creative outlets such as Kendal’s Brewery Arts Centre and urges the Government to find extra funding.
The foundation said it had spent about £500,000 in Cumbria over five years, but was having to plan without yet knowing the outcome of negotiations over Northern Rock, which gives 5% of its pre-tax profits to the charity.
“Until we know the future of the bank, our trustees are having to make cautious budgets for this year,” said a spokesman.
He said organisations that received foundation grants did valuable work and should be able to attract other funding.
