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| Virgin eyeing Northern Rock deal | |
| (20 minutes later) | |
| Sir Richard Branson's Virgin Group is planning to take a majority stake in Northern Rock, the BBC has learned. | |
| Under the plans, Northern Rock would keep its stock market listing but be rebranded as Virgin Money. | |
| According to BBC business editor Robert Peston, Sir Richard is putting together a consortium of investors to take a majority stake in the troubled bank. | |
| Both Virgin and Northern Rock declined to comment, but Robert Peston said Virgin would deliver an update soon. | |
| Earlier on Friday, Northern Rock shares rose as much as 6% on rumours of a possible deal, but had settled back to stand up 1.25p at 259.25p in late morning trade. | |
| Financial support | |
| Our business editor says that if the deal went ahead, the business would be run by Jayne-Anne Gadhia, a Virgin veteran who has been working with Sir Richard on developing a mortgage business for him. | |
| However, he warns that any deal would be dependent on the government continuing to financially support Northern Rock. | |
| "There are, of course, big obstacles, not least of which is that Northern Rock has now borrowed £13bn in emergency funds from the Bank of England - with the loans underwritten by the Treasury - and all of that would have to be refinanced by any successful bidder," he says. | |
| Refinancing the loan in current market conditions would be "too difficult" for any buyer should Treasury support be withdrawn immediately on completion of the deal. | |
| Bid battle? | |
| However, any bid from Virgin could face opposition from a number of possible rival suitors. | However, any bid from Virgin could face opposition from a number of possible rival suitors. |
| Reports have suggested US private equity group JC Flowers has set aside £15bn ($30.6bn) to buy the bank. | Reports have suggested US private equity group JC Flowers has set aside £15bn ($30.6bn) to buy the bank. |
| Further speculation also suggests that JC Flowers and rival Cerberus are planning to break up the firm and buy its lucrative home loan book. | Further speculation also suggests that JC Flowers and rival Cerberus are planning to break up the firm and buy its lucrative home loan book. |
| Meanwhile, hedge funds SRM Global and RAB Capital have taken stakes in the firm, fanning hopes that the business may be taken over as a going concern. | Meanwhile, hedge funds SRM Global and RAB Capital have taken stakes in the firm, fanning hopes that the business may be taken over as a going concern. |
| Northern Rock ran into trouble last month when it was forced to call on the Bank of England for an emergency loan as it ran into funding problems as a result of the global credit crunch - which began in the US. | Northern Rock ran into trouble last month when it was forced to call on the Bank of England for an emergency loan as it ran into funding problems as a result of the global credit crunch - which began in the US. |
| Northern Rock was particularly hard hit because it borrows an unusually large proportion of the money it lends to homebuyers from other banks. | Northern Rock was particularly hard hit because it borrows an unusually large proportion of the money it lends to homebuyers from other banks. |
| The Virgin group pushed into the financial services sector in 1995 and now offers credit cards, insurance, savings and pensions. | The Virgin group pushed into the financial services sector in 1995 and now offers credit cards, insurance, savings and pensions. |