Hedge Funds Battle Board of Northern Rock

In a letter published yesterday, SRM Global Master Fund and RAB Capital urged shareholders of Northern Rock to support resolutions the two hedge funds have put down during a special meeting to be held next week by the mortgage bank, reports Financial Times.

Both hedge funds hold more than 17 percent of Northern Rock’s shares, and have demanded an extraordinary meeting to pass the resolutions, which would stop the board from issuing new shares, buying or selling assets, or making changes to the structure of the bank without explicit approval from shareholders.

According to FT, Northern Rock’s board has advised shareholders to vote against the resolutions at the January 15 meeting, and proposes shareholder approval would be needed if the bank sold more than 5 percent of its assets. Still, RAB and SRM are concerned that if the resolution is passed, they’ll be denied the opportunity to vote on any rescue deal the bank agrees.

In the letter, SRM stated that the bank wasn’t alone in suffering from its “inability to access short term liquidity from the wholesale credit markets,” and that it thought Northern Rock had a “strong and viable business,” according to FT.