An investment group led by veteran troubleshooter Luqman Arnold has made a long-awaited rescue proposal for Northern Rock, as another suitor, US buy-out firm JC Flowers, pulled out of the bidding.
The British government, which has sanctioned about £25 billion of Bank of England loans for Northern Rock since it became the country's biggest casualty of the global credit crunch in September, has picked a group led by Richard Branson's Virgin Group as its preferred bidder for the bank. But it has said it is open to talks with other parties.
Olivant, the group headed by Arnold, the former boss of British bank Abbey, said its proposal would enable Northern Rock to quickly repay between £10 billion and £15 billion of Bank of England (BoE) loans. It said it aimed to repay the BoE loans in full by the end of 2009.
The Virgin group has said it would immediately repay £11 billion of the BoE loans. Olivant said it also planned for Northern Rock to raise up to £800m through a rights issue and an equity subscription by Olivant.
Olivant said it had non-binding support from shareholders owning 23% of Northern Rock to take up their share of the rights issue.
Separately, it was reported that JC Flowers had withdrawn from the auction process, saying it was impossible to construct a deal that would deliver required value for Northern Rock shareholders alongside its own profitability criteria.
