Government backs Northern Rock funding

THE government will back a private sector rescue of Northern Rock through the sale bonds to pay off the lender's £24 billion debts.Northern Rock will be placed “temporary public ownership” if a private sector solution cannot be agreed, it said.

THE government will back a private sector rescue of Northern Rock through the sale bonds to pay off the lender's £24 billion debts.

Northern Rock will be placed “temporary public ownership” if a private sector solution cannot be agreed, it said.

The Treasury had originally hoped that private sector bidders would be able to pay off up to £15 billion of the mortgage lender's Bank of England debts up front, but would-be rescuers have struggled to raise financing following the credit crunch.

The proposals would see the Northern Rock selling a pool of its mortgages to a financing company, which would sell the Government-backed bonds in money markets.

Northern Rock will pay the arrangement fees and expenses for the new funding plans, although the Treasury reserves the right to withdraw and examine other proposals if necessary.

Three private sector teams are vying to salvage Northern Rock - a consortium led by Sir Richard Branson's Virgin, investment group Olivant, and the Newcastle-based firm's own management.

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They will have until February 4 to submit their proposals, the Treasury added.

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