Northern Rock shareholders lose compensation battle
February 17, 2009
A British court on Friday rejected claims by former shareholders in nationalised mortgage lender Northern Rock that the government was being unfair in a plan to compensate them.
The Treasury took over the shares when Northern Rock was nationalised a year ago, and it has appointed BDO Stoy Hayward as independent valuer to set the appropriate level of compensation.
But shareholders argued that the government has wrongly compelled the independent valuer to assume that Northern Rock was a failed bank, leaving the share value at little more than zero.
The government's claim is that without state support, Northern Rock was unable to stay in business, so it should not be valued as a going concern. The share-holders are contesting that assumption, but the court ruled in the government's favour.
"We have come to the conclusion that the provisions made for the compensation of the shareholders of Northern Rock do not infringe their rights," said Lord Justice Stanley Burnton, who heard the case with Justice Stephen Silber.
The court denied the share-holders' petition for a full judicial hearing, but granted them per-mission to appeal the decision.
Nationalisation
The British government pumped 27 billion pounds ($38.6 billion) in loans and assumed contingent liabilities of £29 billion in an effort to keep Northern Rock afloat, before resorting to nationalisation....
Author: Gleaner Reporter
Source: Jamaica Gleaner
