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Shareholders to grill Rock board Shareholders to grill Rock board
(about 3 hours later)
Northern Rock looks set to face a fight from its shareholders over its sale process at a key meeting later. Northern Rock is set to face a fight from its shareholders over its sale process at a key meeting later.
At the emergency meeting in Newcastle, investors will get their first chance to grill management since the bank first ran into trouble last September.At the emergency meeting in Newcastle, investors will get their first chance to grill management since the bank first ran into trouble last September.
They are expected to demand more of a say in the future of the firm.They are expected to demand more of a say in the future of the firm.
But analysts have warned that if they succeed, the lender is certain to be nationalised, leaving investors with little or nothing for their shares.But analysts have warned that if they succeed, the lender is certain to be nationalised, leaving investors with little or nothing for their shares.
Speculation that Northern Rock is about to be nationalised has intensified since the weekend when it emerged that the Treasury has put together a fully developed plan to own and manage the bank, should a rescue deal with a private buyer be impossible. People have seen the value of their investments plummet from more than £12 in February last year to 82.5 pence after the Newcastle-based bank became Britain's most high-profile casualty of the global credit crisis.
This includes lining up the former boss of Lloyd's insurance market, Ron Sandler, to take charge in the post of executive chairman. Rescue deal
Speculation that Northern Rock is about to be nationalised has intensified since the weekend.
It emerged that the Treasury has put together a fully developed plan to own and manage the bank, should a rescue deal with a private buyer be impossible.
This includes lining up the businessman credited with turning around the fortunes of the Lloyd's of London insurance market, Ron Sandler, to take charge in the post of executive chairman.
I sit and re-read the letters from the bank and the hedge funds, but really there is no conclusion Sylvia Murphy, Northern Rock shareholder Shareholders give their views
These developments come as thousands of investors in Northern Rock prepare to vote on resolutions to restrict the bank's ability to sell the company's assets or issue new shares.These developments come as thousands of investors in Northern Rock prepare to vote on resolutions to restrict the bank's ability to sell the company's assets or issue new shares.
These proposals were put forward by Northern Rock's two biggest shareholders, hedge funds RAB Capital and SRM Global, which together own about 18% of the bank, to prevent the bank's assets being sold off on the cheap. These proposals were put forward by Northern Rock's two biggest shareholders, hedge funds RAB Capital and SRM Global, which together own about 18% of the bank, to prevent its assets being sold off on the cheap.
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. They believe 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.
But Northern Rock's management and analysts have urged shareholders to vote against these proposals or endanger any possible commercial solution. But Northern Rock's management and analysts have urged shareholders to vote against these proposals, saying they could endanger any possible commercial solution.
Confusion
Many of the bank's 180,000 shareholders were awarded their shares when Northern Rock demutualised 10 years ago.
Some say they are confused about the right course of action.
One shareholder, Sylvia Murphy from Cramlington, said: "If you vote for Northern Rock, can you trust the management to do the right thing? But if you vote with SRM and RAB, will they do the right thing?"
The debacle is set to blow out of the water a resonant manifestation of Gordon Brown's financial prudence, the sustainable investment rule Business editor Robert Peston Peston's blog: The breaking of Mr Brown's fiscal rule
Armand Borisewitz and his wife, from Aberdeen, obtained 500 shares each when the company demutualised and at one point they were worth £12,000. At Northern Rock's current share price, they would be worth £825.
He believes a class-action should be brought against the previous Northern Rock management, but as for the future direction of the company, he "hasn't got a clue".
Northern Rock was forced to go to the Bank of England for a lifeline last September when it was unable to raise the required funds to run its mortgage business from the jammed up money markets,
Repercussions
It has been given more than £25bn of Bank of England emergency loans, but with government guarantees to savers and other lenders, the total aid package underwritten by the taxpayer comes to more than double that.
This could have severe political repercussions for Prime Minister Gordon Brown, whose reputation as chancellor was defined by his supposed adherence to financial prudence, says BBC business editor Robert Peston.
He argues that whether or not Northern Rock is nationalised, the government will be forced to include a large portion of the bank's balance sheet into its public sector accounts, breaching the prime minister's sustainable investment rule.
"It would be a big stick for the opposition to use in beating up Brown and the Treasury, " Mr Peston said.
"But it shouldn't affect taxation and spending policy".