Largest Northern Rock holder says aid plan flawed

Largest Northern Rock holder says aid plan flawed
Reuters - Thursday, February 14 07:44 pm

LONDON (Reuters) - Hedge fund SRM, the largest shareholder of Northern Rock , argued on Thursday a financial aid plan provided by the Bank of England and the Treasury to the stricken bank is flawed.

Its response comes a day after the government asked two suitors competing to rescue Northern Rock to improve their offers or it would nationalise Britain's fifth-largest mortgage lender.

SRM said in a statement on Thursday that the European State Aid regime had been misapplied to Northern Rock, which owes taxpayers 25 billion pounds since it became Britain's biggest casualty of the global credit squeeze in September.

"The government incorrectly conceded that measures were state aid ... and has not made any appeal of the Commission's decision. As a consequence, the criteria set out by the Treasury for continued liquidity support are flawed," the fund said.

"It would be a mistake for the government to take a decision on private sector bids and the future of Northern Rock without revisiting the question of state aid and the appropriateness of its criteria."

On Wednesday, Britain picked a consortium led by billionaire Richard Branson's Virgin group as a front-runner in the race to rescue Northern Rock, ahead of a rival "in-house" offer led by the bank's management team and supported by SRM.