Virgin Group may consider Northern Rock bid

Richard Branson's Virgin Group is today reported to be the latest suitor eyeing a move for crisis-hit Northern Rock.

It is understood that the gyms, phones and airline group is looking to take a controlling stake in the troubled bank with the backing of investors in the Middle East and the United States, according to The Times newspaper.

A tie-up could see the mortgage lender's operations merged with the firm's Virgin Money business, which already offers mortgages, credit cards and insurance services.

Virgin is believed to have already met the Newcastle-based bank's management and is currently in talks with possible investors, The Times said.

The company is just one of a number of suitors said to be circling Northern Rock, which has seen its share price dive after it was forced to seek emergency funding from the Bank of England last month.

The news sparked the first run on a UK bank for 150 years, as customers rushed to withdraw their funds to safeguard their savings.

Earlier this month, it emerged that New York-based private equity firm JC Flowers had raised £15bn (€21.45bn) to bid for the bank, while private equity firm Cerberus is also understood to be interested in the firm’s assets.

Other names in the frame have included Blackstone and Apax, although no formal offers have yet been tabled.

Banking giant Citi has also agreed to be on hand to lend Northern Rock some £10bn (€14.3bn) to help ease its funding crisis.

It is understood that Virgin is putting together a finance package that could involve the loan from Citi, and would seek to take control of the group through the issuing of new shares.

It will not make a formal offer for the bank, The Times newspaper reported. Virgin was not immediately available for comment.

The crisis at Northern Rock has led to major criticisms of the banking regulatory system. Chancellor Alistair Darling said yesterday he was looking to introduce new legislation to increase protection for savers’ deposits.

The Government has already guaranteed to protect customers’ funds at Northern Rock, including all new accounts opened since the troubles took hold last month.

The group found itself calling on the Bank of England after it was faced with soaring borrowing costs amid tighter credit markets following the collapse of the sub-prime mortgage market – loans to borrowers with poor credit records – in the US.