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With nationalisation now decided as Northern Rock’s (NRK) fate, questions have turned to what payout shareholders will get for their suspended shares. The government has said it will appoint an independent valuer to decide on compensation, although warns it won’t refund shareholders ‘for value which is dependent on taxpayers’ support’.

Hedge funds SRM and RAB Capital are widely tipped to launch legal claims while the UK Shareholders Association (it is representing 4,000 Northern Rock private investors) says it ‘intends to purse any legal options’ for ‘fair and reasonable compensation’.

SRM has reportedly written to the Treasury asking for a minimum of 400p. Both it and RAB have argued Northern Rock’s collapse was not purely the fault of the clearly aggressive business model. At last month’s AGM, SRM and RAB pointed the finger at Bank of England governor Mervyn King for making public its emergency loan.

Had Northern Rock been supplied borrowing in secret it wouldn’t have suffered a run on deposits and the funding gap would have been £2 billion–3 billion rather than the reported £26 billion the Bank of England is said to have lent it.

Setting aside any issues of culpability, a valuer’s assessment of the equity value left in the business would clearly be zero had not the Bank of England and Treasury, which is said to have given £25 billion of guarantees to Northern Rock’s lenders, stepped in. But James Hamilton, an analyst at Numis, predicts a payment to avoid a ‘Railtrack II situation’.

Railtrack is a different to Northern Rock because the government put the former into administration. There is no obligation to pay shareholders anything from administration. As it happened a payout was offered ahead of threatened legal claims, which the institutions took although private shareholders rejected, only to later lose their claim in court.

To nationalise the bank, the government needs to pass the appropriate legislation through Parliament. The bill containing the legislation was presented to MPs on Monday (18 February) and is expected to get passed in days despite Conservative opposition.