Northern Rock’s shareholders displayed an “instinct for self-preservation” at their extraordinary general meeting this week, said The Daily Telegraph. They rejected an attempt by two hedge funds, SRM and RAB Capital – who bought in on the cheap after the bank collapsed and now want to protect their investment – to obtain a veto over any sale of the bank’s assets. The resolution would have made a sale to the private sector even harder.
Still, shareholders have “no moral right to expect a return”, as the FT pointed out. The bank would be bust and shareholders penniless if taxpayers weren’t propping it up with £55bn of loans and guarantees, added Alex Brummer in the Daily Mail. Had Northen Rock not been a bank affecting Britain’s financial stability, it would have been in administration months ago.
All the sound and fury in Newcastle doesn’t change the fact that in Whitehall, nationalisation “has moved from being the option of last resort to that of first resort”, as The Daily Telegraph put it. News that Lloyd’s of London’s former chief Ron Sandler has been appointed executive chairman-designate of a nationalised Rock reveals “how far the planning for a state rescue has progressed”.
Is nationalisation inevitable?
The board may soon “have to give up on the private-sector bid”, said Anthony Hilton in the Evening Standard; the chances of a rescue from the Virgin consortium or Oliphant are fading as the credit crunch has made banks loath to provide backing for the bidders; “it is proving almost impossible to nail down” a watertight financial package. Moreover, with nationalisation, the taxpayer would receive any profits once the bank has been stabilised. Nationalisation may be “embarrassing”, said The Guardian, but “it looks like the only feasible option”.
NRK: 12m change -94%.
See also:
Philip Richards: saviour of the Rock?
Northern Rock – who’s to blame?