Northern Rock rebels win backing of big shareholder

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AP2, or the Second Swedish National Pension Fund as the public sector funds manager is known, has bought shares in Northern Rock since it went into meltdown. It now holds a 1.8% stake, making it the former building society's sixth-largest shareholder.

SRM Global Fund, run by Jon Wood, with a 9.96% stake, and RAB Capital, run by Philip Richards, which yesterday increased its stake to 7.76%, have put forward four resolutions that Northern Rock's board, led by Bryan Sanderson, opposes. The hedge funds want all but the smallest board decisions to be put to a shareholder vote.

But Carl Rosen, head of corporate governance at AP2, said: "We will support the proposals from the two largest shareholders. We think it is good for shareholders - that is why we think it is important to vote."

If Northern Rock's army of almost 200,000 private shareholders, as expected, also support the proposals, the rebels can now count on the backing of holders of more than 20% of the company.

Rosen said the state pension fund, which manages £18 billion of assets, had not yet decided whether it would back either of the rescue plans, put forward by Sir Richard Branson's Virgin and Luqman Arnold's Olivant.

The board and the Treasury have until the end of this month to decide between the two rescues or face the prospect that Chancellor Alistair Darling will be forced to nationalise Northern Rock, which owes the Bank of England £26 billion.