ELEVENTH-HOUR legal and shareholder bids to derail Virgin Group's offer to take over Northern Rock are believed to be imminent – although the Treasury said yesterday it believed it had contravened no European Union laws.
It is understood that lawyers for hedge fund SRM Global, the biggest shareholder in the beleaguered bank, delivered a report to the government yesterday saying the Treasury needed to reassess the criteria it used for rescue proposals.
It is believ
ed SRM's advisers claim the Treasury wrongly applied the rules of the European State Aid regime to its emergency funding for Northern, amounting to some £26 billion.
The legal move by SRM, which owns 11.5 per cent of Northern, is seen as an attempt to pull the government back from choosing a consortium led by Sir Richard Branson's Virgin Group to rescue the bank.
But a Treasury spokesman said yesterday: "If that is their position all we can say is that we have been in extensive discussions with the European Commission all the way through this process and, as they write the law (on state subsidy], we believe our actions would be consistent with that law."
Separately, SRM and the other main shareholder in Northern, hedge fund RAB Capital, which speaks for 8.2 per cent of the mortgage bank, say they will vote against any Branson bid.
They see it as heavily dilutive of existing shareholders. There is speculation that the two funds, who together speak for 19.7 per cent of Northern, will up their stake to 25 per cent in a bid to block Branson.
But Northern said yesterday it was currently unclear whether a 75 per cent majority or a straight 50.01 per cent majority would be needed on either Branson's proposal or the rival in-house offer.
A spokesman said: "We don't know the details yet, but 75 per cent would be needed if there was a special resolution, and 50 per cent if there was an ordinary resolution."
The Treasury is also believed to be pressing Virgin for up to £200 million if it turns around Northern within three years as the price for the government guarantee of bonds to replace the £26bn loaned to Northern by the Bank of England.
The full article contains 379 words and appears in The Scotsman newspaper.
