Rock's biggest investors demand EGM

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Northern Rock's two biggest shareholders have hit back at attempts to exclude them from determining the bank's future by calling for a rule change that would let investors block a sale of the bank.

SRM Global Fund and RAB Capital, which own 13 per cent of Northern Rock between them, want Northern Rock's board to call an extraordinary general meeting to approve a motion requiring shareholder approval for a sale of 5 per cent or more of the bank's assets.

SRM and RAB have been fiercely critical of the current plan to sell or break up Northern Rock. They argue that the bank is a good business that needs time to secure new funding, and that the Government should not allow it to be sold off cheaply because it is desperate to get back the £20bn or more that has been lent to the bank.

The hedge funds have dismissed proposals from Virgin Money and JC Flowers, which want to buy out shareholders for below the Rock's already shattered share price. They support the proposal from Luqman Arnold, former boss of Abbey National, who wants to buy new shares and revive the bank for shareholders. SRM and RAB said: "We believe that Northern Rock is a valuable company with a high-quality asset base, as has been demonstrated by the many expressions of interest. We do not wish to prejudge any outcome but consider that it is important that any proposal for the company's future should be submitted to shareholders for their consideration.

"We do not believe that there is any conflict between the interests of HM Treasury and the company's employees and shareholders, all of whom wish to see the value of Northern Rock preserved. The only conflict is between the interests of Northern Rock and the interests of the bidders who wish to purchase all or part of Northern Rock at fire sale prices."

The Government has given Northern Rock until February to find a buyer or some other way to resolve its future. The Chancellor, Alistair Darling, has made it clear that shareholders are not a priority as the authorities try to bring the crisis to a close.

The bank sent out a sales document to prospective bidders two weeks ago, asking for proposals for buying or breaking up the business.

Northern Rock said it noted the announcement but declined to comment further.