Letter from Bryan Sanderson

On Thursday the NRSSG received a letter from Rock Chairman Bryan Sanderson, responding to a number of points we raised in the aftermath of the recent EGM.

NRSSG founder Robin Ashby writes:

They're not necessarily great answers, but any communication is better than none. You'll have seen from my comments elsewhere that I was pleased at the spirit of the EGM and hope that we can have a new sense of common purpose going forward.

We reproduce the text of Mr Sanderson's response below:

Our question: The company has appointed Georgeson to ring shareholders at home, even though they have made clear on the calling notice what the directors position was. Why have you done that and how much money has it cost?
Bryan Sanderson: The Company thought it important that, as far as possible, the vote at the EGM represented the views of all shareholders so was keen to encourage all shareholders to vote and to help them to do so. The Company hired Georgeson because it has the resources and expertise necessary to approach shareholders, particularly the very large number of small shareholders, to encourage them to vote and give them opportunity to ask questions about the voting process. I do not think it is appropriate to disclose the amount that the Company paid Georgeson, not least because it is a confidential commercial arrangement between them and the Company, however, I can disclose that they were paid negotiated market rates which the Company wholly appropriate. In the context of the overall costs of the EGM, which you will recall was convened at the behest of two of our shareholders, the amount was small.

Our question: Will the strategic review safeguard the interests of the Northern Rock Foundation?
Bryan Sanderson: The Company is very proud of our work with the Foundation and would like to see it continue in the future. However, any decision concerning the Company's support of the Foundation must await the outcome of the strategic review process (SRP). As I stressed at the EGM -- and as the Company has announced on several occasions since October -- the SRP is expected to be completed in February. In the meantime, pending the outcome of the SRP, the Foundation's Trustees have indicated they have funds set aside to meet all of the Foundation's outstanding commitments and are keeping their priorities and budgets under review. We are encouraged by the apparent desire of HM Government disclosed in its recent announcement that the good work of the Foundation continues in all circumstances.

Our question: Why was there a significant delay in entering substantive negations with the Olivant consortium and what is the current state of these negotiations?
Bryan Sanderson: The Company's discussions with Olivant concerning its proposal were able to progress, and Olivant was able to become fully involved in the SRP, as soon as it decided to sign the form of the non-disclosure agreement that all other interested parties had signed. They did so some time after the Virgin Consortium and other interested parties had signed their non-disclosure agreements in substantially the same terms. Because of its delay in doing so, Olivant was initially behind some other interested parties but has caught up now as a result of the efforts it and we have made. Olivant is now fully engaged in the process and we are working closely with them to assist them in progressing their proposal.

Our question: How much do you expect to have to pay all the consultants and advisors supporting the strategic review?
Bryan Sanderson: As you know, the SRP is ongoing and it is therefore impossible to predict the total cost of all consultants and advisors supporting the process. I can tell you that the Company is paying its advisers negotiated market rates that it considers wholly appropriate. I would expect to be able to give you a more accurate and up-to-date figure in the documentation sent to shareholders at the time we will seek approval of the outcome of the SRP.

Our question: Chairman, will you undertake to keep the shareholders better informed about the strategic review as it proceeds?
Bryan Sanderson: As I explained at the EGM, the Company is significantly constrained by confidentiality and other legal requirements in relation to the information it is able to provide shareholders about the SRP. We are constantly monitoring our ability to provide you with information concerning the SRP and will continue to announce developments if and when we are legally permitted to do so. As we have said, as things stand currently, we expect to provide full details to shareholders when we come to them for approval of the outcome of the SRP.

Our question: Has Northern Rock approach the European Central Bank for financial support as was recently suggested by an MEP?
Bryan Sanderson: Given the Company's eligible collateral it would not have been possible to secure any meaningful advance from the European Central Bank before October 2007 and even that option is no longer possible given the terms of the Bank of England facility.

Northern Rock media round-up no. 2

In Thursday's Times (24 January 2008), Ann Trenemann wrote in her parliamentary sketch of PMQs:

As David Cameron arose and started shouting about Northern Rock, the PM flashed another inappropriate smile. Oh, how he must yearn for his first-class cabin at times like this: his capsule bed, his little pyjama outfit, his fluffy socks and his light reading ( War and Peace in the original Russian).

With reluctance, he dragged himself back to PMQs and the wild-eyed man opposite demanding to know how much taxpayers’ money had been invested in Northern Rock. “If the bonds aren’t paid back and if Northern Rock fails to meet its obligations, what is the total exposure? How much?” demanded Mr Cameron.

The PM wouldn’t say. “It is our intention to get the taxpayer the best deal, their money back and to make a profit!”

Well, snapped David Cameron, the real answer was £55 billion and he accused the PM of acting like Del Boy.

The PM was pained. Del Boy? What was that? A horse? A pineapple? Was it related to kebabs? The world must be very confusing at times for our Prime Minister. Mr Cameron shouted: “This is a sub-prime deal from a sub-prime minister!”

This economic taunt hurt, not least because Mr Brown understood it, and the slug-fest began in earnest, a sort of Rocky VI in suits though, actually, I guess that would be Northern Rocky VI. The PM kept saying that the economy was stable, Mr Cameron the opposite. “Isn’t this Northern Rock deal just damaging, dodgy extra debt from a failed Prime Minister?” he screamed.

On Saturday, the Newcastle Journal, reporting on the House of Commons Treasury Committee's report, The run on the Rock, quoted NRSSG founder Robin Ashby:

Last night Robin Ashby, of the Northern Rock Small Shareholders Group, said: “I welcome this report by the Court of Parliament. It brings rapidly to the attention of the authorities their own ‘Contributory Negligence’ in the collapse of Northern Rock and is justification, if any further were needed, in the continuing role of the Government and taxpayer in ensuring that the bank is able to restructure itself and go forward.

On Sunday, writing in the Observer, Catherine Bennett asked (of Richard Branson), 'Why is anyone fooled by the smile of this slick operator?' She concludes:

Branson's Screw It, Let's Do It philosophy may be more persuasive than it looks. Once Rophynol has been ruled out, and, given Mrs Brown's presence, undressed girls ('I believe in using sex appeal to promote the Virgin image'), we may have to accept that nothing more than crass self-promotion has convinced Brown, one of the most sanctimonious leaders in political history, that an act of collective altruism in favour of Branson and his financiers would be fairer, and more popular with taxpayers, than nationalisation. Unless he's just keen on space. A lot of boys are.

UKSA Northern Rock Update 19

The latest Northern Rock update from the UK Shareholders Association is now available online, in PDF format, at:
http://www.uksa.org.uk/NorthernRock_Update_19.pdf

Earlier Northern Rock bulletins from the UKSA can also be found on the UKSA website.

Northern Rock media round-up no. 1

Here's our selection of the Northern Rock media coverage in the past week or so:

In 'Northern Rock shareholders welcome plan' (22/01/08), the Financial Times reported that Rock shareholders welcomed government plans as "increasing the chances of an indepdendent, commercially viable future". It quotes NRSSG founder Robin Ashby reacting to the proposals:

"It gives a platform for those people who have some realistic chance of putting together rescue plans in a timely fashion," said Mr Ashby.

On 21/01/08, the Daily Mail reported on accusations of a "cosy stitch-up" between Gordon Brown and Sir Richard Branson. The Prime Minister has admitted he discussed the deal with Sir Richard while in China earlier this week.

Sunday's Observer (20/01/08) asked "how is the Geordie bravado holding up in the face of dire economic - and footballing - circumstance?"

Small investor Robin Ashby bought his shares in Northern Rock to show his support for the local economy. 'It is one of only two big quoted companies based in the north east,' he says. It is also, he adds, 'fantastically' important to the area - about 3,500 of its 6,300 employees are based in Newcastle and a further 1,500 in nearby Sunderland. Northern Rock is one of the few businesses employing significant numbers of graduate trainees - many of its senior management, including former chief executive Adam Applegarth, joined the company that way. Its charita ble foundation is a 'significant player' in local projects; and, of course, its name is emblazoned on the shirts of Newcastle's football team.

Ashby's loyalty prevented him from selling out last August, when the first hints emerged that its business could be affected by the sub-prime crisis. He remained faithful even when the repercussions from bad lending in the US sent Northern Rock to the Bank of England for help and savers queued to withdraw their money.
Like the rest of the Rock's shareholders, large and small, he hopes that loyalty will be repaid with a sale of the bank to one of the two private-sector bidders. But the odds on some form of nationalisation remain significant, for all last week's assurances by Alistair Darling and Gordon Brown that a private-sector solution remains the preferred course.

Wanted: Your Northern Rock memories

Financial journalist Richard Tomlinson is writing an article about Northern Rock, going back to its days as a building society. He'd like to talk to or meet NRSSG members and Rock account-holders, not just about the present situation but also about the history of the bank-cum-building-society.
He'll be in Newcastle on Thursday 24 January and Friday 25 January. If you've got the time to talk to him, and think you might be able to help him, let us know (melanie@north-house.com) and we'll pass the message on.

Rock coverage in latest Private Eye

The Northern Rock gets considerable coverage in the latest issue of Private Eye (25 January 2008). We reproduce here the photo from page 3, which tickled us.

"The rescue plan is a lot more appealing than the alternative - nationalisation."

Northern Rock Small Shareholders' Group founder Robin Ashby made an appearance in an article in the Daily Mirror yesterday about the Rock. Robin set out the position of the NRSSG:

The rescue plan is a lot more appealing than the alternative - nationalisation. That would sound the death knell for the Northern Rock name and be a disaster for the bank and its employees. It would also do much damage to Britain's reputation as an international financial centre. It could also signal the end of the Northern Rock Foundation. This pumps around £20million a year into regional charities. In short, it would be a disaster. The Chancellor's proposals hold out prospects that the investments of small shareholders might be worth something in the long term. It gives the three would-be buyers a platform to come up with firm proposals in the tight timescale set. I think small shareholders would favour the Olivant bid because it offers us the most realistic prospect of maximising our stake. We could have sold out but we didn't because we believed in The Rock then - and we believe in it still.

Robin's contribution was counterpointed against one by Matthew Elliott of the Taxpayers' Alliance. You can view the article in full on the Daily Mirror website.

Welcome to the Northern Rock Small Shareholders' Group Blog

Welcome to the new NRSSG blog. We hope to use this to communicate with our members but also to post up occassional news stories and also to give you the opportunity to comment on the latest developments.

Please let us know by adding comments to this post if you have any feedback or suggestions.

Our aims:

1. Our preference is for Northern Rock to remain an independent, publicly quoted business headquartered in the North East, supporting the Northern Rock Charitable Foundation.

2. We are opposed to a 'fire sale' of the company's assets at below true value, and the dismemberment of the business.

3. If the company is acquired, our preference will be for a buyer of the shares who gives us the option of remaining shareholders going forward.

4. We will resist pressure by authorities to compel Northern Rock to actions which are not in the best interest of the small shareholders.

Any small shareholder is welcome to join the group by emailing or writing with the name and contact details of each shareholder (if shares held jointly). There is no membership charge.

Northern Rock EGM: Our reactions

From: Robin Ashby, Northern Rock Small Shareholders' Group <nrssg@north-house.com>
To: Northern Rock Small Shareholders' Group
Subject: Northern Rock EGM

You will by now have heard the outcome of the resolutions of the EGM. Shareholders voted two-to-one to suppport the largest shareholders -- but because of the vagaries of the rules, only one motion was formally approved. Undoubtedly, however, this represents a moral victory for us,
and the directors would be unwise to go against the spirit of the motions.

I was greatly encouraged by the meeting. The directors heard the authentic voice of the shareholders. The meeting was held in a frank but polite spirit and I'm sure that we have a renewed community of interest and of purpose between shareholders large and small, and the directors.
Comments made about the employees and the Northern Rock Foundation will have demonstrated to the impartial observer that we recognise we are all in this together. In particular, the addresses made by the heads of the two largest shareholders will have belied the abuse against "hedge
funds" -- they are clearly committed to the business and the future, and confirmed their wilingness to contribute to a rights issue. The chairman had a good touch in his opening remarks referring to having the second-most difficult job in Newcastle!

You will know that I had intended to vote against the election of the directors, but having persuaded them to speak about their commitment to the company, I decided to put my trust in them and vote to keep them.

There is a long way to go still, and we continue to be beset by political spin, but I am confident that the Chairman Bryan Sanderson will do his best to keep the company out of the hands of the government!

Last thoughts before the Northern Rock EGM

Writes Robin Ashby:

Northern Rock has sold off over £2 billion of prime assets. The Unite trade union, from supporting Northern Rock directors against the major shareholders, are suddenly concerned about that self off and the impact on their members job prospects. (Literally, told you so. I had been in discussion with one of their national officials 48 hours earlier on this topic and got the brush off when I raised exactly this worry)

Government-by-leak continues as it seems they have lined up an executive chairman if they decide to nationalise. This would be a tremendous political coup for the Liberal Democrats, who have advocated this outcome as the least-worst for the taxpayer since well before Christmas. It seems they have forgotten that shareholders are voters too! And its a kick in the teeth to Parliament, before whose Treasury Select Committee the Chancellor of the Exchequer appeared last week. He could have put all this on the table, but declined to do so.

The directors continue to spend our money, seemingly without any sense of responsibility towards us. They have commissioned consultants at vast expense to harangue us in our homes to vote against the big shareholders, while urging us to back their unknown placemen and women as non-executive directors. It appears they are splashing out millions in secret bonuses to 179 senior staff. Undoubtedly there could be a retention problem with the most able of them, and some sort of loyalty scheme might well be in order, but the reported figures are disproportionate at best.

Although it is outside of the remit of NRSSG, I have had discussions with local MP Alan Beith, and on Saturday he called for "a detailed inquiry focussed on learning lessons from the debacle." This doesn't go quite as far as some would like, but is certainly a start. I have also pushed Vince Cable MP who is briefing the media today on the matter.

Despite all the media exposure, I can tell you I have had no approach from the company to brief me on anything. Despite this, I continue to feed in proposed responses to media calls to their Press Department so they are not taken unawares. I can tell you however that I spoke again to Luqman Arnold of Olivant last week, and he remains convinced that he and his supporters, working with the support of the major shareholders, can rescue Northern Rock. But time is marching on, and the company is less well placed than when he first offered to step in. (Prime assets sold, extra bonus payments made to staff, pay rises given which will increase redundancy costs, the continuing slow erosion of confidence, a stupid dispute with the major shareholders, a blatant disregard of our interests. How long will this go on? We need to hang together lest we hang separately!)

Regretfully I have to tell you that I have learned only this morning that for many of us whose shares are held in ISAs and PEPs, our votes have already been cast on our behalf by brokers running nominee accounts with discretionary powers. I have had a terse conversation with my own (Wise Speke/Brewin Dolphin) who have voted my wife's shares exactly opposite to what she would have wished. They hide behind the fine print of client agreements which they oblige us to sign even though it can hardly be considered informed consent.

Over the weekend I've done a number of media interviews and today and tomorrow will be solid with them (including US television). Media will be buzzing around the Newcastle Arena tomorrow, and may well ask you if you'd like your say, so be prepared!