British investment group Olivant came forward with a detailed rescue offer for mortgage lender Northern Rock PLC on Friday as US investment firm JC Flowers reportedly pulled out of the bidding process.
The offer from Olivant, which includes immediately repaying up to US$30.5 billion of the government funds propping up Northern Rock, could be a strong contender to the current preferred bid from Richard Branson's Virgin Group.
Olivant chief Luqman Arnold, a buyout veteran, said he was confident his proposal would win favor with the government and shareholders.
"The government has indicated its complete openness to any proposals that address the issues and the needs," he said.
"Our proposal is simpler, smoother and quicker," he said.
Shares in Northern Rock jumped 7.4 percent to close at US$2.24 on the London Stock Exchange.
Olivant plans to take over management of the mortgage lender in return for a 15 percent stake, developing the company as "a strong, independent brand" under the Northern Rock name.
The outstanding value of a series of loans from the Bank of England would be repaid by 2009, it said.
The Virgin consortium proposes to re-brand Northern Rock as part of the Virgin Money business and take a 55 percent stake in the bank.
It has said it would repay US$22.7 billion of the Bank of England debt immediately.
Olivant outlined its offer as JC Flowers reportedly pulled out of contention. The US buyout firm sent letters to the Treasury notifying officials of its position, the Financial Times and Daily Telegraph reported.
Flowers did not immediately return a call.
The European Commission gave the bidding process some fresh oxygen earlier this week by clearing the state aid that kept Northern Rock afloat after it fell victim to the global credit crisis. After declining to reveal specifics for weeks, Northern Rock said on Thursday that it had so far borrowed US$50.8 billion.
Northern Rock ran into trouble in September when short-term money markets dried up following the collapse of the US subprime mortgage market. Heavily reliant on funding from those markets, Northern Rock approached the Bank of England for an emergency loan.
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