Court action threat by Rock shareholders
ANGRY Northern Rock shareholders yesterday issued a “see you in court” riposte to the Government over its decision to nationalise the stricken mortgage bank.
The Rock’s two biggest investors, hedge funds SRM and RAB Capital, are set to lead what could be a lengthy legal action.
They have already seen the paper value of their £150million investment in a combined 20 per cent stake virtually halved.
SRM boss Jon Wood had already sent a detailed note to Alistair Darling setting out the grounds for legal action before the Chancellor’s announcement. RAB said last night: “We are disappointed and we are reviewing our options.”
The hedge funds, together with Legal & General and Schroders, had been in favour of the Rock management team’s rescue plan.
Robin Ashby, founder chairman of the Northern Rock Small Shareholders Group, said he was “shocked an appalled” by the Chancellor’s decision. He added: “I think there will be a long legal battle unless they come up with a fair and reasonable offer.
“That legal action could run through to the next General Election. Large shareholders won’t take it lying down. I thought there was a good offer made by the management of Northern Rock as recently as late on Friday night and that seems to have been brushed to one side with this rush into macho politics. I think this is going to do irreparable damage to Britain’s reputation as a financial services centre.”
The UK Shareholders’ Association (UKSA), which represents more than 100,000 individual investors in the Rock, claimed their investments had already been damaged by the actions and inactions of the be “confiscated”.
It added: “It seems the only reason that the Government has chosen nationalisation is because ‘it offers better value to the taxpayers’. This is equivalent to a thief telling you it offers better value to him to steal from you than to enter into a commercial transaction with you.
“Note that the Government has made it clear shareholders will receive no compensation for the value of their shares as they have set the terms of reference for an independent valuation to be on the basis that the loans have been withdrawn.
“In that case Northern Rock would clearly not be a going concern and hence would have no value. Why the Chancellor did not make this plain in his statement today is unclear.” UKSA said it would pursue any legal options available to it to thwart the nationalisation process.
