Northern Rock Share Discussion Threads

[unglove] 29/7/2009 19:14

IMHO the Govt created a false market in NRK in its last 6 months of trading by propping up the bank with Govt funds but not informing shareholders that if NRK was nationalised that they would pass a law to value NRK on the basis that the funding had been withheld. Therefore, NRK shareholders have my sympathy and good luck with the appeals although it may be some years before you get any compensation. You were robbed by the Labour Govt. Some eminent Peers have expressed concerns at the legality (presumably they meant European legality) of the Government's action after nationalisation - the records are in Hansard.

[miata] 29/7/2009 09:42

Wednesday, 29 July 2009


Former shareholders in nationalised bank Northern Rock failed today in a renewed legal challenge to the Government's "zero return" compensation scheme.

The Court of Appeal in London dismissed an appeal by individual shareholders - including current and retired employees of the Newcastle-based bank - and two hedge funds which also stand to lose out, who had attacked the scheme as "unlawful, unfair and manifestly disproportionate".

They claimed the compensation scheme was deliberately based on false criteria which would lead to shares being valued at zero so the Government would inevitably make a profit when the bank was eventually sold off.

But Lord Justice Laws, sitting with Master of the Rolls Lord Clarke and Lord Justice Waller, rejected any suggestion that the scheme was "in truth only a charade, the product of a settled intention by government to set a formula which would yield a zero figure for compensation".

The scheme was reasonably designed to put shareholders of the ailing bank in the position they would have occupied, vis-a-vis the value of their shares, had no financial support been provided by the Bank of England and the Treasury, the judge said.

The judges upheld the Government's argument that, but for that support, Northern Rock would have been unable to pay its debts as they fell due and would have had to cease business. It was not unreasonable that shares should be valued on that basis.

The case was brought by two hedge funds, SRM Global and RAB Capital, and up to 200,000 private shareholders. They said they would pursue the case in the Supreme Court and, if necessary, the European Court of Human Rights in Strasbourg.

The small investors, headed by former Northern Rock employee Dennis Grainger, 62, who personally lost £114,000 in shares when the bank was nationalised, were backed by the UK Shareholders Association.

They say they stand to lose the vital provisions they made for retirement and personal planning such as funeral payments.

The shareholders insist their shares should be valued at more than £4 each.

The Government argues that the State's £54 billion bail-out of Northern Rock in the form of loans and guarantees in February last year was at considerable cost and risk to the taxpayer.

It was therefore right that, if the bank thrived under public ownership, the State should benefit when it was sold off to the private sector.

Jon Wood, of SRM Global, said after today's ruling: "We are encouraged that the Court of Appeal's judgment acknowledges the real force of our arguments.

"We embarked upon this legal challenge in the full expectation that it would be a lengthy process. We are determined to see it through to its conclusion."

The challenge to the scheme is based on argument that it infringes the human rights principle that the taking of property by the State must be balanced by compensation reasonably related to its value.

Lord Justice Laws said the short-term rescue of Northern Rock, in the absence of help from elsewhere in the market, was by means of "Lender of Last Resort" (LOLR), the underlying purpose of which was to prevent damage to the banking system as a whole, and thus the country's economy, and categorically not to confer a benefit on shareholders.

The judge rejected the shareholders' argument that the takeover involved no risk to the Government.

The economic reality was "all one way", he said. Supporting or acquiring Northern Rock was not a sound commercial proposition for others in the market.

[miata] 29/7/2009 09:42

..........

[grbaker] 29/7/2009 08:57

Then, as far as I am aware, holders have well and truely lost out to the UK gov.

[fastray] 28/7/2009 18:32

What happens if they lose in the european courts?, totally unfair....

[grbaker] 28/7/2009 14:24

No surprise there then... onwards to the European courts.

[rebess3] 28/7/2009 14:21

The courts decision is against a judicial review loking into the fairness of the governments terms of reference in setting up a scheme to look at compensation.

It doesn't say that shareholders are not due to compensation.

[magician2001] 28/7/2009 11:19

Ahhhh, found some news.....

[magician2001] 28/7/2009 11:05

Do you have a link Qantas?

[qantas] 28/7/2009 09:16

Case lost again.

[grbaker] 27/7/2009 14:38

The odds are probably not very good in the UK... this will most likely go to the European Court.

The government will want to drag this out until after the election IMO.

[fastray] 27/7/2009 13:36

Tuesday looks like the day we all find out if we are to get any reasonble compensation , what's the odds?

[qantas] 26/7/2009 21:10

ROCK SHAREHOLDERS READY TO TAKE FIGHT TO EUROPE

NORTHERN ROCK's former shareholders will find out whether or not their battle for compensation has been successful on Tuesday, when the Court of Appeal delivers its verdict.


Hedge funds SRM Global and RAB Capital, insurer Legal & General and thousands of small investors are suing the Government as they believe it rigged the compensation process to ensure that they would not get anything for their shares.

The bank was nationalised in February 2008, ­wiping out investors instantly. When in September it appointed BDO Stoy Hayward to set the level of compensation due to investors the Treasury told the accountancy firm to assume that Northern Rock was "unable to continue as a going concern and in administration".

Shareholders say this prejudices the BDO's ­valuation work and will result in minimal, if any, compensation. It is thought investors want ­compensation worth at least £4 per share. The Treasury declined to comment.

The Government won the original High Court tussle in February, prompting an appeal.

Sources close to the investors say they will take their case to the House of Lords if Tuesday's ruling goes against them. If the court does not grant them leave to appeal to the Law Lords they will take their compensation battle to the European court.

[xavico] 15/7/2009 11:10

I have a right to compensation and so does my wife!

[dysonhooverman] 04/7/2009 03:52

In what way? I ain't trying to claim my 5 pounds back.

2 posts in 14000? Yes I suppose I am whining on a bit.

nob.

[kpwuk] 03/7/2009 07:07

What a whinger!

[frankiestheone] 02/7/2009 21:41

MRYESYES...The Govt were planning to wait until the public feeling against bankers died down and compensate NRK holders either with a small payout ex gratia, or by offering the opportunity to buy into a new private company (possibility of Tesco shares)
so where did this info come from, and will it be in cash or clubcard points

[grbaker] 02/7/2009 09:15

I don't think it will be up to Mr Brown (or any UK Prime Minister)... it will go to the European Court... there are wider issues at stake than just what ex. NRK shareholders do or don't get.

The law passed to enable the UK Gov. to take NRK raises many far-reaching issues.

P.S. The UK Shareholders Association Northern Rock Action Group sent this in a recent email:

"We have been sending people who have received this email a copy of our email newsletter for some time, free of charge. According to our records however you have never contributed financially to the campaign for justice and fair compensation for Northern Rock shareholders, unlike many of our supporters who have. Therefore this is the last newsletter we will be sending you unless you wish to contribute now. It is impossible to run this kind of campaign and fund the legal costs without adequate financial support, and therefore we ask you for the last time to help us. "

I didn't realise that sending emails was expensive.

[mryesyes] 02/7/2009 03:02

Beware of that chap running the Northern Rock Shareholder action group.
All he does is demand £5 a share off the gov't and says he has a legal right to compensation.
The Govt were planning to wait until the public feeling against bankers died down and compensate NRK holders either with a small payout ex gratia, or by offering the opportunity to buy into a new private company (possibility of Tesco shares) at a reduced price, but that guy is crazy
He is having the effect of making the only option not to pay compensation because whatever they offer he will make ridiculous demands that no govt can agree to.
The govt would not want to face a case by BB. holders incl rights issue holders
but with NRK there is no legal case for compensation, but they gave him a hearing but instead on negotiating he debunked everything they said and demanded £5 (making his hedge funds a 400% profit) (politically unacceptable)
They also offered to pay good compensation to ordinary holders but he insisted the same went to the hedge funds who got in at under £1
NRK holders have simply been unlucky, they invested in what all commentators thought was an excellent stock, but as with any investment, if your entire business model falls apart and you cannot trade, you go under
That happened here and the govt owe holders nothing. That chap's mad behaviour looks set to ensure that the best option for Gordon B. is to pay nothing, because whatever they offer he will just claim it proves compensation is owed and demand £5 a share. He is a crazy man, I know him.

[miata] 01/7/2009 16:21

Northern Rock is estimated to have lost another £1bn in the past six months, putting it in breach of regulatory rules even after they were relaxed for the nationalised lender last year.

Despite breaching every rule on capital requirements in the book, the Financial Services Authority is allowing the bank to continue writing new mortgages and taking deposits. While rivals are subjected to punitive new capital standards, the key measure of financial strength, the City watchdog has agreed to ignore the rules for Northern Rock.

The FSA had previously agreed to waive its rules by allowing Northern Rock to include tier two capital, a less secure form of financial reserve, to meet its regulatory minimum. However, the bank said yesterday that, even with the waiver, its "capital base has now reduced to a level below its minimum regulatory capital requirement". As a result the FSA has been unable to extend the waiver, which expired on June 30.
Northern Rock has a plan to address its capital, but it requires state aid clearance from the European Commission. The watchdog has agreed to turn a blind eye until the restructuring plan is accepted, although any other bank would be barred from operating.

Northern Rock said: "The FSA has confirmed that it does not currently intend to restrict the activities of the company while the plan is implemented to address its capital position."

To be in breach of the FSA's relaxed capital rules, analysts calculated that the bank must have lost at least another £1bn in the past six months, the results for which are due in July. Its tier one capital, the main measure of financial strength, was already negative in December, at -£110m. However, tier two capital added £3.1bn and restored the total capital ratio to 10.8pc.

The Basle minimum on capital requirements, though, is 4pc, which means the bank has lost money faster than expected in the first half of 2008. Northern Rock made a £1.36m loss last year after £1.15bn of bad debts and provisions. A third of its £67bn mortgage book was in negative equity.

The bank plans to convert £3bn of the taxpayer's £14bn loan into equity to recapitalise as part of a restructuring, which will see bad loans put into a "bad bank" and the deposits, branches and about £10bn of good lending put into a "good bank".

The bank has insisted that no more taxpayer money will be needed, but in its recent submission document to the EC, Northern Rock conceded it "could require support of around £Xbillion to cover a capital shortfall in 2010-2011" in addition to the £3bn planned. The actual number of billions was removed from the public document.

The Government hopes that the restructuring will make it easier to sell the "good bank", which will have about £20bn of assets, to the private sector. It said in the EC document: "This structure will assist a return of [good bank] to the private sector at an earlier date than otherwise be the case." Interest is expected from private equity companies and smaller retail banks, which could include Tesco Personal Finance and Virgin Money.

Analysts said the Government would be lucky to get £1bn from a sale, which would include the 76 branches and back office systems as well as good mortgages and £20bn of retail deposits. There is a risk, however, that the proceeds will be used to shore up capital reserves at the "bad bank" rather than generate a profit for the taxpayer.

Northern Rock hopes to raise another £1bn of capital by buying back its subordinated debt at a reduced price. However, in the past 18 months, it has burned through at estimated £2.5bn of capital.