SRM Global, a hedge fund and the largest shareholder in Northern Rock, has turned up the heat in the fight for control of the stricken mortgage bank.

SRM, which owns 9.96 per cent of Northern Rock has joined fellow hedge fund RAB Capital in publishing an open letter to investors. The two now peak for 18 per cent of the bank.

They insist that Northern Rock is a strong and viable business and is no lame duck.

RAB said in its letter, sent last Thursday: "In the turmoil many people seem to have ignored the fact that the company remains owned by its shareholders."

The two funds are canvassing support for the emergency meeting they convened in Newcastle for next Tuesday.

At that meeting shareholders will be asked to vote on resolutions which would prevent the bank selling off assets or issuing fresh equity without their approval.

Northern Rock has been in crisis since mid-September, when it was forced to seek emergency loans from the Bank of England after funding from the wholesale markets dried up.

It is estimated that the bank has borrowed at least £26 billion so far. Prime Minister Gordon Brown today refused to guarantee that taxpayers would be refunded in full.

In an interview with the BBC's Today programme Mr Brown also refused to set a firm timetable for finding a buyer for Northern Rock or deciding to nationalise the bank.

“We are in negotiations are the moment with prospective purchasers,” the Prime Minister said. “I don’t know when a final announcement will be made.”

Northern Rock and its advisers are considering rescue proposals from Sir Richard Branson's Virgin Group and Olivant, an investment firm run by Luqman Arnold, the former chief executive of Abbey National.

Virgin is planning to inject up to £1.3 billion of fresh capital into the Rock, including through a rights issue. It would merge the the bank with its Virgin Money brand and take a stake of about 55 per cent. Olivant would take a stake of 15 per cent and also carry out a rights issue.

The hedge funds claim they were forced to act after the bank's board, led by Bryan Sanderson, the chairman, failed to provide assurances that investors would have the right to vote on the proposals.

Both prospective buyers have promised to repay up to £15 billion of the Rock's Bank loans immediately.

RAB, SRM and three other unnamed Rock shareholders are backing Olivant, although the two hedge funds are understood to be prepared to consider realistic rival offers.

RAB Capital's chief executive, Philip Richards, will attend next week's meeting in person. It is not yet clear how SRM will be represented.

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