A third major shareholder in crisis-hit lender Northern Rock yesterday lent its backing to plans giving investors a bigger say over the future of the stricken firm.
Swedish pension fund AP2 - which holds a 1.8 per cent stake - is reportedly set to support proposals from hedge funds RAB Capital and SRM Global which the mortgage lender's board says could hinder a rescue of the business.
SRM and RAB together own 18 per cent in Northern Rock, which has borrowed an estimated £25 billion from the Bank of England to keep afloat after a funding crisis sparked a run on the bank last September.
Their proposals - to be voted on at an extraordinary meeting in Newcastle on January 15 - call for restrictions on the board's ability to sell the company's assets or issue new shares.
Northern Rock chairman Bryan Sanderson has called the resolutions "potentially damaging" and urged shareholders to vote against the proposals.
But the support of AP2 - which was unavailable for comment - would give the hedge funds at least 20 per cent of the vote, with more backing likely to come from other private investors which own around 25 per cent of the shares.
The lender has 100,000 smaller investors and the Northern Rock Small Shareholders Group has emailed its members urging them to post their voting papers ahead of the meeting next Tuesday.
NRSSG head Robin Ashby said he planned to support the proposals and called on all shareholders to consider the resolutions carefully.
The hedge funds, which need more than 50 per cent of the vote to be successful, also intensified their campaign to drum up support with a series of national newspaper advertisements.
Despite its debt burden, SRM described Northern Rock as a "strong and viable" business, adding that the resolutions reflected best practice in protecting shareholder interests.
SRM said: "Northern Rock is nothing like the 'lame duck' that some would have you believe. The company has true value in its assets, its brand and its employees." But Northern Rock investors should withhold their support from proposals aimed at preventing a firesale of the stricken mortgage bank's assets, corporate governance lobby group Pensions and Investments Research Consultants (PIRC) said.
It advised Northern Rock investors to abstain, fearing "a restraint on the board's power to act in the best interest of all shareholders".
A consortium led by Sir Richard Branson's Virgin and the Olivant investment group are both bidding to rescue the bank, but funding efforts have been hindered by tighter debt markets since the credit crunch that originally tipped Northern Rock into crisis four months ago.
Investment bank Goldman Sachs is due to report to the Treasury on financing options for the company in mid-January before a final decision on the future of Northern Rock is taken in February.
Shareholders have favoured Olivant's plans to take a minority stake in the firm, pay off up to £15 billion of the Bank's debt immediately and rescue the lender with a new management team.
But nationalisation or administration looms for the business if a private-sector solution cannot be found.
The Government will have the final veto over any proposals for the company after it was forced to step in to guarantee deposits when thousands of customers queued for their savings.
The taxpayers' total potential exposure to the lender has been estimated at £57 billion.