Actions speak louder than words

21 November 2007 By Mike Verdin

SRM and RAB say Northern Rock shouldn’t be sold on the cheap. If existing shareholders are prepared to inject £1bn of new equity, independence might work. The stricken bank should test whether they are for real by getting them to sign underwriting commitments.

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Northern Rock should turn to its shareholders for cash to reinforce its capital base, SRM Advisers, the UK bank's biggest investor, said, according to the Financial Times.

If the company wants equity, then it can come to the shareholders and we will provide it through a rights issue, SRM boss Jon Wood told the newspaper. SRM on Wednesday raised its Northern Rock stake from 6.2% to 6.4%.

The comment follows pledges by two of Northern Rock's bidders, JC Flowers and Virgin, to invest about £1bn of new cash in the bank should their bids succeed.

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