Rebels put heat on for bigger say over Rock

RAB Capital and SRM Fund Management, which have been building their stakes since the first run on a bank in living memory, are drumming up support for the extraordinary general meeting they have called next week.

Between them they now own almost 18% of the former building society. They also reckon they can count on the support of most of Northern Rock's 250,000 private shareholders most of whom retain shares from when the former building society floated on the stock market 10 years ago.

At the same time Goldman Sachs, which is advising the Treasury, is due to report to Chancellor Alistair Darling soon on financing options for any rescue.

There are suggestions that banks including Citigroup and Royal Bank of Scotland are reluctant to form a consortium to raise up to £15 billion in return for large chunks of Northern Rock's mortgage book in the light of a weakening UK housing market. This was meant to let any rescue bidder pay back half the £26 billion of emergency loans from the Bank of England almost immediately.

Philip Richards, chief executive of RAB Capital, said he will attend the meeting a week tomorrow at Newcastle's 11,000-seat Metro Radio Arena.

He told other shareholders in a letter: "We are concerned that, due to external pressure the board of directors is clearly experiencing, shareholders' views and interests appear overshadowed by political considerations."

Richards and his counterpart at SRM, Jon Wood, have already forced the Government and Northern Rock's board to make Luqman Arnold's Olivant an equal bidder to the early rescue favourite, the Virgin consortium.

Arnold's bid would involve far less dilution for existing shareholders and RAB and SRM have said they are prepared to back a rights issue to raise new capital for the bank as Olivant plans.

But Northern Rock opposes the four resolutions put forward by the hedge funds, which broadly prevent it issuing new shares or selling off parts of the business without the approval of 50% of shareholders. It has begun lobbying other shareholders including cold calling private investors.

Richards said in normal circumstances he "might agree that the board's executive powers should not be unduly restricted" but pointed out Northern Rock's circumstances were no longer "normal" nor "day to day". He said the resolutions were necessary, given that:

The board has publicly acknowledged it is under political pressure from a variety of interested parties

The board has no collective track record of success in managing the company

Shareholders' consent to any significant transaction would be advantageous to the board, and would have the effect of ratifying their decision.