Harbinger Seeks Payout for Northern Rock Stake in U.K. Appeal

Harbinger Capital Partners LLC will try to convince a London appeals judge that its stake in Northern Rock Asset Management Plc wasn’t worthless when the British lender was nationalized.

In a trial starting today, billionaire Philip Falcone’s hedge fund will argue the stake was worth as much as 400 million pounds ($633.9 million) before Northern Rock was rescued by the British government in 2008.

Harbinger lost its first claim in 2011 when a lower court upheld the decision of a government-appointed valuation expert that the preference shares were worthless.

Northern Rock, the first British casualty of the credit crunch, was taken into public ownership in February 2008 after a run on deposits saw customers withdraw 4.45 billion pounds.

In the May 2011 trial, Harbinger’s lawyer Mark Phillips said the zero valuation by BDO International valuer Andrew Caldwell was “utterly unreasonable” and sought 322.5 million pounds.

“Having applied the valuation assumptions that he was required by law to apply, the independent valuer determined that there was no value in the shares,” Laura Clare, a spokeswoman for BDO, said by e-mail. She declined to comment on ongoing legal proceedings.

Steven Goldberg, a spokesman for New York-based Harbinger, declined to comment. Louise Verrill, a lawyer for the company, didn’t immediately respond to an e-mail seeking comment.

Harbinger was told in December it may be sued by federal prosecutors in the U.S. for securities-law violations. The hedge fund’s assets have slumped from $26 billion three years ago to about $5.7 billion amid regulatory hurdles and the threat of prosecution.

Other Northern Rock shareholders, including RAB Capital Plc and SRM Global, lost a July 2009 bid for a court review of how the equity of the bank would be valued.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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