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Retour au sujet NTHN.ROCK ORD 25P

NTHN.ROCK ORD 25P : A LIRE

rheind
24 févr. 200812:15

UKSA—The independent voice of the private shareholder
The United Kingdom Shareholders’ Association Limited. Registered in England No. 4541415
1
To Northern Rock Shareholders
24 February 2008
UK Shareholders Association
BM UKSA
London

Phone: 0870-70-60-600
Email: uksa@uksa.org.uk
Web: www.uksa.org.uk
Northern Rock Shareholders Action Group – Update No. 25
Fair Compensation to Shareholders?
The Treasury has said that it will appoint an “independent“ valuer to determine the
compensation to be paid to shareholders in Northern Rock. However, the draft Northern
Rock plc Compensation Scheme Order 2008, which can be read on The Treasury website,
www.hm-treasury.gov.uk/consultations_and_legislation/banking/banking_specialprovision_bill.cfm ,
requires the valuer to assume that Northern Rock:
(a) Is unable to continue as a going concern; and
(b) Is in administration.
With such “terms of reference” imposed upon him any valuation will NOT be fair, unbiased
and independent!
In our view it is grossly unethical to set the terms of reference in this way when clearly the
company is not in administration and is a going concern. It would not be a going concern if
the Government had demanded repayment of its loans but it has not done so and is unlikely
to do so. Otherwise it continues to do business in a normal manner and has a surplus of
assets over liabilities. The view that it is a “going concern” was reiterated by Ministers in
Parliament and on television (see later).
By rigging the valuation in this way, they will ensure that the value put on the shares by the
valuer will be negligible. In addition of course the Government has mismanaged the crisis
at Northern Rock, which eroded the foundations of the company, and has continually
threatened either nationalisation or a forced disposal of the company at a low value, which
have eroded the share price. The Government cannot benefit from their own actions in this
way to enable it to then acquire ownership at a minimal cost.
As the authorities must share much of the blame for what happened, and were in effective
control of the company from 13th September 2007, UKSA believes that the valuation should
be truly independent and unrestricted by Treasury dictate. We suggest that the valuation
should be undertaken by a panel of say four valuers, from different professional institutions.
Their brief should take into account the background circumstances; European law; published
net asset values at 30th June and 31st December 2007 and U.K commonly accepted
accounting principles. In addition none of the valuers so appointed should be employed by
firms who receive any significant business from the Government. The advantage of such a
truly independent panel is that it would be fair to all stakeholders, large and small, and
avoid expensive and time-consuming litigation.
UKSA
2
Legal Action?
As we have said repeatedly (for example I talked about it in 8 TV interviews alone on
Monday the 18th), our group considers the compensation proposals to be unfair and indeed
illegal under European Law – specifically the European Convention on Human Rights. We
intend to actively pursue that and other possible legal issues subject to detailed legal advice
on the best avenues to pursue.
We may of course need to raise substantial funds to do this and will be writing to
shareholders who have registered their interest in this case in due course. But in the
meantime there is already an Appeal Fund in place and our donation form is present at:
www.uksa.org.uk/Northern_Rock_Appeal_Letter.pdf
Clearly there are also other major shareholders such as SRM Global who are considering
legal action.
We have appointed David Greene of Edwin Coe as our legal representative. He represented
shareholders in Railtrack which is a similar case in some regards (although different in
others) and shareholders were given reasonable compensation after a lengthy legal suit
when they were originally offered very little.
The Proper Basis to Value Northern Rock
The following is a note we received from Brian Sandilands, a qualified accountant, on this
issue which I am quoting here as it matches very much my understanding of the proper way
to value any business:
European law says that government can not take property (Northern Rock shares) of someone
unless it’s in the public interest and if they do they must pay fair market value for this property.
Fair market value is defined as:
“Fair market value”, a central standard of measuring business value, is defined as the price at
which property would change hands between a willing buyer and a willing seller when the former
is not under any compulsion to buy and the latter is not under any compulsion to sell, both
parties having reasonable knowledge of relevant facts. See IRS Rev. Rul. 59-60, 1959-1,. Bulletin
237, codified at 26 C.F.R. § 20.2031-1(b).
The fair market value standard incorporates certain assumptions, including the assumptions
that the hypothetical purchaser is reasonably prudent and rational but is not motivated by any
synergistic or strategic influences; that the business will continue as a going concern and not be
liquidated; that the hypothetical transaction will be conducted in cash or equivalents; and that
the parties are willing and able to consummate the transaction.
These assumptions might not, and probably do not, reflect the actual conditions of the market in
which the subject business might be sold. However, these conditions are assumed because they
yield a uniform standard of value, after applying generally-accepted valuation techniques, which
allows meaningful comparison between businesses which are similarly situated.
As you have probably heard the government wants the shares valued as if business is not a
going concern, however that contradicts the definition of "fair market value".
3
Note that when valuing companies, a professional valuer will normally use a range of
valuation methods such as earnings per share, net asset value, discounted cash flows,
revenue multiples, and other ratios, and look at the comparable ratios for other similar
quoted businesses (including possibly adding a premium for “control”). Net asset value is
usually the minimum basis which was of course the basis used by those claiming it should
be at least £4 per share.
When looking at the profits of the business, both historic and prospective figures over some
years would be used to try and give some indication of the underlying “sustainable” profits.
They would also likely look at the market value of the business evidenced by the share price
but would exclude the impact of any recent actions by the potential beneficiaries of the
valuation (in this case the Government). In addition they would look at any recent offers for
the business of which there were two in this case (Lloyds TSB and Virgin Group).
Some people have argued that as there were no bidders prepared to step in and take the
company on, including repaying the £25bn of Government loans of course, without
preconditions, then the business must have no value. But that is not so. Many valuations
have to be done when there is no practical offer for the company on the horizon, or indeed
ever likely to be made. For example, would you value BP or Shell at nothing simply because
there is no larger company around who could afford to buy them? The answer is surely no.
In essence, valuation is a complex art which can take some weeks where the business is
large and complicated as in Northern Rock, but it is based on well known principles that
professional valuers and the law courts have established as a fair way to achieve an answer.
Regrettably the Government seems to be trying to corrupt this practice.
Other Issues that Might Affect the Valuation
One of the complexities of Northern Rock that attracted the attention of Parliament during
the passage of the nationalisation bill was the existence of the Granite securitisation vehicle.
This is a trust created some years ago in the Channel Islands that was used to raise funds
to back Northern Rock mortgages. The trust is not owned by Northern Rock (oddly enough
the beneficiaries are a small charity that until recently seemed to know nothing about it),
but is consolidated into the Northern Rock accounts as it is effectively a “poodle” of the
company and is controlled by them. But it is not included in the nationalisation. Whether to
include that in the valuation of the company might be debatable.
Another issue is that of the Northern Rock staff pension scheme. By using the assumption
that the company is in administration, when it is not of course, this means that the
valuation would have to assume that the pension scheme would have to be secured with
insurance contracts thus increasing the liabilities of the company by £150 to £200 million.
That is much higher than the current deficit of about £50 million and more pertinently
assumes the scheme will be wound up when the indication from the management is that it
will not be.
Discriminating Between Different Shareholders
It has been suggested to me that compensation should be based on some criteria that
reduces the amount paid to recent speculators, and particularly the “hedge funds” that
nobody seems to like, while giving more to long term holders or smaller shareholders.
4
It is a basic tenet of company law that all shareholders are equal and must be treated
equally and UKSA would be very opposed to any attempt to set a precedent that would
overturn this principle. It is one of the few aspects of company law that protects the
interests of smaller shareholders.
Forcing the Nationalisation Through Parliament and the Ethics of the Government
Another demonstration of the antics of the Government to ensure little debate on the
nationalisation was the speed with which the bill was forced through Parliament, which
seemed totally unnecessary. In addition it was put through as a “public” bill (i.e. one of
general applicability with no mention even of Northern Rock) when it should have been put
through as a “hybrid” bill – in the latter case there would have been more debate, a slower
process and private individuals who are affected can petition Parliament. The method
chosen was therefore clearly an abuse of Parliamentary process which was totally
unnecessary except to stifle debate and public representation on it.
The general approach of the Government to Northern Rock was well put by Tim Congdon in
an article in the Financial Times. He said: “Western Governments have deplored the Russian
State’s expropriation of privately owned oil companies. What the British Government have
done with Northern Rock – by falsely representing a business transaction at market rates or
above as “state aid”, encouraging a frenzy of hostile and largely silly press comment,
cajoling the management and shareholders, and finally imposing a compulsory
nationalisation without compensation – bears comparison with President Vladimir Putin’s
devices to steal assets in the former Soviet Union”.
Question Time and NRSSG
Thanks for those of our supporters who attended the BBC1 Question Time programme in
Newcastle this week. Questions were raised about the plight of shareholders but all they got
from the panel was sympathy. Robin Ashby of the Northern Rock Small Shareholders Group
in Newcastle spoke for example (he runs a group based in Newcastle who are currently
conducting a poll on their web site as to what shareholders consider a fair price for their
shares). One particularly interesting comment from Government Minister Ruth Kelly was
that the company “will continue as a going concern under public ownership”. This of course
is a direct contradiction of what the Government is trying to dictate as the basis for valuing
the business.
Volunteers for a Panel of Small Shareholders and Other Speakers
Note that we get repeated requests from the TV and Press to interview small shareholders
on the subject of Northern Rock. They are usually looking for people who are not
experienced stock market investors, who held Northern Rock shares perhaps because they
acquired them in the original demutualisation, or can otherwise be classed as the “man or
woman in the street”. If you held less than 2,000 shares, and are willing to talk at short
notice on TV, or radio, or be reported in the press, then please let me have your contact
details (including a telephone number).
In addition we are looking for people based in London who could act as occasional media
spokespersons for our group. Please let me have your contact details if you have any
experience in this area.
5
More Committee Members Required
The Northern Rock Shareholders Action Group has a committee of six people at present
(including myself as Chairman). We hoped the group would have a fairly short life but as we
are now facing prolonged law suits we need one or two more people to strengthen our
committee. We would be particularly interested in people with senior financial experience in
business or those who could represent us in public and to the media. Please call me on
0208-467-2686 if you can assist. This is of course a part-time, unpaid role.
The Future of Northern Rock
There are a lot of questions about what will happen to Northern Rock in future – for
example how many jobs will be lost, how much the business will shrink, how long it may
remain nationalised before being sold off again, even whether the Government will be able
to do more than simply run it into the ground. But as former shareholders this is no longer
of concern to us and I will therefore not be commenting on those issues in future (as of
today’s date you no longer own shares in this company).
Incidentally some shareholders seem to be under the misapprehension that when the
Government subsequently sells off this company (i.e. denationalises it), then they may
recoup their shares or some interest in the company. THIS IS NOT THE CASE. It will
undoubtedly be sold off as a “private equity” deal with someone else making fat profits in
due course from the recovery of the company.
Should Shareholders Continue to Hold Deposits in Northern Rock?
One question that may occur to many shareholders is should they continue to support this
business by keeping money on deposit with it? In a previous note I pointed out that Robin
Ashby had encouraged shareholders to do that, and indicated I had followed his lead myself.
Note that the UK Shareholders Association cannot give you advice on how you should invest
your money, in Northern Rock, or elsewhere, in the same way as we deliberately avoided
giving advice as to whether people should buy or sell the shares.
It does however seem likely that Northern Rock will reduce the competiveness of their
deposit rates as they are going to have to be exceedingly careful to avoid accusations of
unfair competition by reason of Government support from other banks.
In addition as one shareholder put it to me, why would former shareholders continue to
support this business by keeping money in it when the new owners have confiscated their
property without fair compensation? All I can say is that if the Government does not offer a
fair and independent valuation for such compensation very soon then I will personally be
withdrawing all my deposits with the company, and putting some of it into our Appeal Fund.
Information for New Contacts
We have received a large number of new supporters for our campaign following the
announcement of nationalisation – indeed we have been almost overwhelmed by the
response with many commenting specifically on how oppressive and immoral the actions of
the Government have been. These “Update” notes have been issued approximately weekly
over the last few months (you can see all the past ones on our web site), but may be less
frequent in future as legal action can be a long drawn out process and it will take time for us
to gather support and funding.
6
One thing worth pointing out is that the actions of the Government in the last few weeks
have been fairly typical of their approach to shareholders in public companies. Namely that
we are seen as simply gamblers in the stock market with rights that can be ignored at their
convenience.
The UK Shareholders Association has campaigned for many years to try to improve the lot
of private shareholders and increase the strength of our voice in the political arena. But we
need to increase the number of our members to really have an impact. Please consider
membership (which has other benefits apart from supporting our campaigns) – details can
be seen on our web site at: www.uksa.org.uk/Membership.htm .
Roger Lawson
Communications Director
UK Shareholders Association
Email: uksa@uksa.org.uk
Web: www.uksa.org.uk
Direct telephone: 020-8467-2686

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4 réponses

  • jcbubu
    24 février 200814:14

    résumé et peut être une conclusion encore merci

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  • flepers
    24 février 200820:37

    sur la suite des événements ...
    ... perso j ai vendu la moitié de ma position avant la suspension ...
    ... ai je eu raison ???

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  • tyrael10
    25 février 200814:18

    En 2 mots parce que j'ai pas trop le temps
    Vu la façon dont le gouvernement à donné mandat à un expert "indépendant" pour faire une valo de la boite et vu les guidlines données à cet expert, les actionnaires se retrouveront avec rien ou quasi rien.
    Des associations se forment pour porter plaintes et essaye de rassembler les actionnaires, bien sur il faut payer pour cela et supporter les frais de justice.
    Tout cela peut prendre bien sur des années.
    Voila
    Bon courage à ceux qui sont restés

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  • jcbubu
    25 février 200817:39

    l époque j étais sur metaleurop j ai attendu 1 AN 1/2 MAIS l attente avais porter ses fruits alors j attend .....

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