Bank shareholder queries Virgin bid

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Hedge fund RAB Capital - owner of a 6.7% stake - said the proposals by the consortium named as preferred bidder to rescue the company undervalued the bank.

The consortium is planning to inject £1.3bn of funds in return for a controlling stake of at least 55%.

Part of the cash will be raised through new shares being offered at 25p each, giving Northern Rock an implied value of about £225m - a fraction of the group's £5.2bn value seen in February.

RAB Capital chief executive Philip Richards said events were a "step closer" to securing the business - but is pressing for a higher offer.

He said: "We do not believe that this proposal reflects the true value of Northern Rock, and we would expect either that this proposal be improved or that alternative proposals be brought forward which would combine a similar repayment schedule for the Treasury together with improved terms for shareholders."

RAB Capital's opposition could pose a threat to the deal being given the go ahead. The group has already said it would block any deal that would not deliver value for money for shareholders.

About 100,000 of Northern Rock's small shareholders also wrote to company chairman Bryan Sanderson on Sunday to express fears that directors were planning a "fire sale" of assets.

The deal for the troubled lender - at the centre of the UK's first bank run for nearly 150 years in September after soaring borrowing costs - will see Virgin Money and Sir Richard stump up £200m.

The Northern Rock name would go, with the bank rebranded under the Virgin banner.