Two suitors confirm Rock offers

Northern Rock shares have plunged in recent months

Two suitors, Virgin Group and investment firm Olivant, have confirmed separate rescue bids for troubled bank Northern Rock.

US private equity firms JC Flowers and Cerberus were also expected to come forward with offers for the lender.

However, analysts warned that bids probably will be low because any future owner would have to pay back about £24bn of Bank of England loans.

The consortium led by Virgin said it would run the bank as a going concern.

It would be rebranded as a Virgin business and the former boss of Lloyds TSB, Sir Brian Pitman, would be the bank's chairman.

Virgin said that a significant proportion of Northern Rock's emergency borrowings from the Bank of England would be repaid immediately.

Olivant, a team led by veteran troubleshooter and former Abbey National boss Luqman Arnold, said it had made a detailed proposal to stabilise the bank as a viable business and restore its finances.

Press reports this week claimed that the British taxpayer could still be underwriting up to £6bn worth of loans to the bank until 2010.

"The key to repayment of the Bank of England facility is to stabilise Northern Rock and restore confidence in the bank and its brand," Mr Arnold said.

Both Virgin and Olivant gave few details of the formal proposals, which were submitted for a Friday deadline.

Possible outcomes

BBC business editor Robert Peston has previously said that there were three possible different destinations for Northern Rock:

• the sale of the whole company
• the sale of the basic physical infrastructure of the business i.e. the branches, information technology and call centre, which may also include Northern Rock's £13.5bn of retail deposits and matching assets
• the sale of the infrastructure plus all those securitised mortgages

Other reports have suggested that the government could "nationalise" the lender, breaking up the business itself to recoup taxpayers' cash.

JC Flowers, meanwhile, has put together a high-profile management team to make their case for taking over the bank stronger, while rival private equity firm Cerberus has also been rumoured to have been scouring Northern Rock's books.

A private equity buyer would be a controversial choice given their reputation for buying firms on the cheap to turn a fast profit, particularly because any buyer is likely to demand that the government continuing to guarantee savers' deposits in the bank.

There have been reports that buyers would call for interest payments on the Bank of England loans to be scrapped - arguing this would enable them to save jobs.

The bank has been in trouble since getting caught up in the financial storm over the summer, which left it unable to borrow money from other banks to fund its business model.