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Northern Rock's two biggest shareholders are confident a private-sector solution will be found for the stricken bank, as its chairman warned against a rushed nationalisation.
Philip Richards, the chief executive of RAB Capital, and Jon Wood, the head of SRM Global, said work on finding a private deal had gathered pace.
They said that the British Government now understood that they and other investors were willing to put hundreds of millions of pounds into the company.
As the British Cabinet discussed the possibility of nationalisation, Richards said: "We don't think it is good for anybody if Northern Rock is nationalised. We think the Government recognises that and that nationalisation would only be a last resort."
The hedge-fund bosses said they were now close to the centre of activity and could not give more details.
Asked why they were so confident of a private-sector deal, Wood said: "Credit markets have improved a lot and Libor rates have come crashing down ... but it is a little bit difficult for us to answer that."
Richards added: "Things are moving quite fast ... we haven't bought shares for a few days because we don't want to be in a position of knowing something that someone else doesn't."
Richards and Wood, whose funds hold about 18 per cent of the bank, were talking after Northern Rock's extraordinary shareholder meeting in Newcastle, which they called in an attempt to limit the board's ability to sell assets.
They gained simple majorities to all their resolutions, but only one - limiting the issue of new shares - was passed as the other three required a 75 per cent vote in favour.
The spectre of nationalisation of Northern Rock has loomed larger since the new year.
Tough credit markets have made it hard for the bank or potential bidders to secure finance to start repaying about £24 billion ($60.4 billion) of loans to the Bank of England.
This week, Chancellor Alistair Darling updated the Cabinet amid strong hints the Government could be moving towards nationalisation.
Prime Minister Gordon Brown also told a TV news show that it was "one of the options that has got to be considered".
Brown added: "There are a number of companies in the private sector that have expressed an interest, but public ownership is one of the options and the reason we've got to look at everything ... is that the stability of the British economy is the issue."
Northern Rock's chairman, Bryan Sanderson, told shareholders: "To those who advocate nationalisation and be damned to the shareholders, our response is that this will be immensely damaging to the financial reputation of London and the UK, and the people of the north-east."
He said Northern Rock's assets were sound and that the company was undervalued.
He had "lectured" the authorities and politicians about the importance of shareholders and that they had accepted many of his arguments.
The Treasury has given Northern Rock until February 12 to conduct a strategic review and recommend a bid or another private-sector solution.
But the Chancellor has said he wants a speedy resolution and it emerged at the weekend that the Government has sounded out Ron Sandler, the former head of Lloyd's of London, to run the bank under public ownership.
The Government has also commissioned Goldman Sachs to come up with financing proposals, which could include packaging up the loans for sale with a Bank of England guarantee, and bringing in sovereign wealth funds from Asia or the Middle East.
Sanderson said the Goldman report was "the missing piece of the jigsaw" for any deal.
"I should have seen it but I haven't. I was expecting to see it 48 hours ago."
- INDEPENDENT
