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31 Mar 2010
Northern Rock's former shareholders are not entitled to any compensation for their stake in the troubled bank, valuation experts from BDO have said.
Andrew Caldwell, valuations expert at the firm was told to treat the troubled bank as if it was not a going concern and already in administration in calculating how much the bank was worth after stripping out the government's £25bn rescue package.
Caldwell has come to his final decision after being appointed as valuer in September 2008. He made a provisional statement to the same effect last December, but has now confirmed the valuation.
BDO said in a statement: "Having applied the valuation assumptions that he was required by law to apply, the Independent Valuer has determined that there is no value in the shares (or right to receive shares) as at the valuation date and therefore that no compensation is payable to former shareholders (and to those whose rights to receive shares have been extinguished)."
Critics have said the valuation criteria, which BDO was paid £4.5m for handling, was "rigged" by the Government so shareholders got no money back.
These "assumptions" clearly did not apply when the nationalisation took place," The Northern Rock Shareholders Action Group said on its website.
"The company was not in administration, and was trading normally and as a going concern (as Ministers have repeatedly said in Parliament and elsewhere). Such terms of reference for the valuation of any company are likely to result in a negligible valuation.
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Shame on you BDO
This valuation process was nothing more than an attempt by the government to provide the aura of legitimacy to their theft of the property of Northern Rock shareholders.
At the time of nationalisation Northern Rock had net assets of £2.7 billion.
By applying a discount to the assets of Northern Rock of 15% BDO determined that the company had negative net assets.
This discount was completely artificial and was determined by the governments dodgy valuation terms. It is completely ridiculous that one party in a dispute can set terms that are blatantly in there own favour and makes a mockery of the word independent. I am sure if Northern Rock shareholders had been given the decision how to value their shares they would have chosen the highest point that the shares reached on the stockmarket.
At the end of the day BDO knew the valuation terms were dodgy and the valuation would not be independent but went ahead and took the money anyway. They then wasted over a year and a half of time coming to a conclusion that should have taken five minutes and could have been written on the back of a fag packet.
Posted by: Arnie Newington, 01 Apr 2010 | 00:00
Terms of reference nonsense
In my view it is complete nonsense that the government can determine the terms of reference for the valuation of shares in which they have the largest interest.
This flies in the face of integrity, independence and professionalism to such a ludricous extent that the original shareholders get no compensation at all. If this had been perpetrated by anyone other than the govenment then I would expect a fraud case to be won.
Posted by: Jonathan, 27 Jul 2010 | 00:00