Northern Rock revises rescue bid

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The board of Northern Rock, leading an in-house bid to rescue the troubled bank, has sweetened its proposal.

The team is competing with Sir Richard Branson's Virgin Group, which is widely regarded as the frontrunner.

Both suitors have been called on to improve their proposals, including offering more for the billions in financial support from the government.

The bank's board said late on Friday that it would inject more cash into the bank by selling shares.

More cash

The offer submitted to the government and regulators said it would inject £700m compared with £500m in its original proposal.

The Virgin consortium has said it will inject £1.25bn via a share sale.

"The board continues to believe that the revised...proposal, once implemented in full, will result in an independent, well-capitalised, low cost and low risk mortgage and savings bank," it said.

The revised offer also included an unspecified "improvement in economic returns" for the government, in exchange for the guarantee it is providing on the £55bn of financial assistance given to the bank from the Bank of England.

The government is considering taking the lender into public hands if a suitable private sector rescue proposal does not emerge.

Deadlines loom

The government needs to decide on Northern Rock's future by the end of this month.

This is so it can then go the European Commission to get approval for any rescue deal by 17 March, the cut-off date for the current emergency funding.

Virgin and Northern Rock's board both made rescue offers for the bank by the Treasury's 4 February deadline.

Revised offers are due to be offered on Saturday, reports said.

Northern Rock got itself into financial difficulties last year because its business model left it ill-prepared for the global credit crunch.

It was forced to ask the Bank of England for emergency funding, triggering the first run on a British bank in more than a century.