Deadline runs out today on Northern Rock offers (Reuters) (04-02-2008)

LONDON (Reuters) - A deadline, by which it will be decided whether Northern Rock will be acquired or nationalized, runs out today. Bidders include billionaire Richard Branson, investment company Olivant and an "in-house" management team, led by ex-insurance executive Paul Thompson.

If chosen Virgin will reduce the amount of capital it would inject into Northern Rock to about 1.25 billion pounds ($2.5 billion) from 1.55 billion earmarked previously, while all three are planning to pursue low risk strategies that will see them shrink Northern Rock's mortgage book until it is on a more stable footing.

Any more aggressive plans to compete for new lending are likely to be on hold until a 25 billion pound loan from the government is paid off, to ensure European regulators don't block a government-backed funding package. Rival lenders are watching to ensure Northern Rock does not gain a competitive financing advantage from the government's guarantee.

Virgin has been reported to be the government's preferred choice, as it offers the cleanest break from the crisis and the government, which wants a private sector buyer, but it needs to choose which is the best option for the bank's future as well as for British taxpayers. It could still opt for a temporary nationalization if none of the offers stack up.

By 5:11 a.m. EST Northern Rock shares were up 4.2 percent at 100 pence, valuing the bank at about 420 million pounds.

The government could make its decision in about a week, but may take until the end of the month. It needs approval from the European Commission by March 17, the cut-off date for the current emergency funding.

The final decision is likely to rest with Brown. The government has been criticized by its handling of the crisis since the bank was forced to seek emergency loans from the Bank of England in mid-September after a global credit crisis caused its business model to collapse.

The government is guaranteeing financing being made available to all bidders, meaning the bank's fortunes will be tied to the state for several years.

Source: Reuters