Thrifty Loans

It seems that the chances of a major bidding war for Northern Rock have disappeared as it seems that only two bidders will be putting forward plans for its takeover by the deadline on Monday 4 February.

After taking advice from investment bankers Goldman Sachs, a fortnight ago Chancellor Alistair Darling offered taxpayer’s money for £26bn to underwrite any rescue plan, and the Government would guarantee savings and bonds to £14bn. The City greeted the news with enthusiasm and Rock shares went up by 50% at the news.

However, despite renewed interest from erstwhile interested parties, JC Flowers and Cerberus, it now seems that the two firm bidders will remain as Sir Richard Bran’s Virgin consortium and Luqman Arnold’s Olivant.

The deadline appears to have too tight for Cerberus to rework its plans, and JC Flowers is said to be showing more interest in a £4bn takeover of Friends Provident.

Indeed, neither Virgin nor Olivant have yet submitted their proposals, but both have said they will do so by Monday’s deadline.

It is still not clear whether Northern Rock chairman Sir Bryan Sanderson will be able to submit his own stand alone plans for the ailing bank. The board is finding it hard to secure new funding, whereas Virgin is able to source new capital and Olivant will rely on its shareholders backing the plan.

Mr Darling is keen to keep to the timetable. Final proposals are due in by Monday and it is planned to make a decision on a single preferred bidder a week later on 11 February.

That would leave the Chancellor just over a month to cement the refinancing package. There are two reasons: one, so that it does not break his economic golden rule by the time of the Budget on 12 March; and two, mainly to be able to prove to the European Union on 17 March that this is not illegal state aid.