RAB rattles Rock
The largest shareholder in Northern Rock, RAB Capital, is limiting the room for manoeuvre of the bank's board as it seeks a solution to its financial crisis.
In an interview with me, broadcast on the Today Programme, the chief executive of RAB – which controls almost 7 per cent of Northern Rock – says that he would not hesitate to vote against any takeover of Northern Rock which did not properly value its shares.
Northern Rock's preferred route out of its current crisis is to sell itself off in whole or in pieces to other banks or financial institutions.
Almost any rescue of the Rock would require shareholder approval, so RAB – one of London's leading hedge funds, with around £4bn under management – has clout.
Philip Richards, RAB's chief executive, is trying to reinforce his influence, by insisting that even relatively small asset-sales by the Rock should not take place without a shareholder vote.
He does not want Northern Rock to sell assets now, because he fears it would obtain a terrible price for them, due to the crisis in money markets
Richards wants a solution that leaves Northern Rock more or less intact and with existing shareholders in control of a significant proportion of the bank's shares - which would rule out many of the rescue proposals being considered by the Rock's board this weekend.
Richards says that the preliminary rescue proposals from a consortium led by Virgin, and a separate one by the former chief executive of Abbey National, Luqman Arnold, seem to offer the best prospects for shareholders of those on the table.
He characterises other proposals that have been put to the Rock board as coming from “vultures”.
Richards is potentially at odds with the Treasury, whose first priority is to secure repayment of around £25bn of taxpayer-backed loans to the Rock and is less concerned about returns to shareholders.
If the Rock were put into administration under insolvency procedures, as some have urged as the best way to secure repayment of public funds, Richards does not rule out suing the Treasury – though he hopes it would not come to that.