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British Chancellor of the Exchequer Alistair Darling was expected to unveil plans for Northern Rock overnight after reports he intended to convert £25 billion ($64 billion) of loans to the bank into bonds to help attract bidders.
Darling was to make a statement to Parliament on ways to
fund a sale. The loan conversion decision, which was recommended by Goldman Sachs Group, made a sale more likely than nationalisation, the BBC reported.
"The Chancellor will make a statement to the House of Commons," Prime Minister Gordon Brown said. "All options are under consideration. That includes the public ownership of Northern Rock."
Northern Rock has tapped the Bank of England for emergency loans totalling more than £25 billion after the collapse of the US sub-prime mortgage market drove up market credit costs and triggered a run on deposits at the lender in September. Four months later, Brown is seeking a solution that would avoid the biggest bank nationalisation in half a century.
Darling's statement will outline conditions under which Northern Rock loans would be converted into bonds, as well as what bidders may have to do to access the funds, according to a person with knowledge of the plan, who declined to be identified.
The Treasury was also to release a statement on Northern Rock to the London Stock Exchange, the BBC said.
Richard Branson, founder of Virgin Group, said last week that his group was still the "preferred" bidder for the bank. Virgin would sweeten its offer to try to win support from investors, the Sunday Times reported.
Branson is one of 30 executives visiting China and India with Brown. Both said that they discussed Northern Rock on the trip, though "not in any detail".
Branson said in Shanghai that it was "pleasing that Goldman Sachs have a package they believe works, and we're looking forward to getting into detailed discussions".
Luqman Arnold's Olivant Advisers has also made an offer for the bank. Northern Rock's own management may bid.
Brown has said nationalising the bank remained an option, though finding a private buyer was still preferable.
Paul Kafka, a London-based Goldman Sachs spokesman, declined to comment either on Brown's remarks or the BBC report. Brian Giles, a spokesman for Northern Rock, also declined to comment.
"One moment Gordon Brown is talking up nationalisation and now he is in full retreat," said George Osborne, the opposition Conservative Party's Treasury spokesman. "He appears to be planning to entrench the taxpayers' exposure and shatter his own debt rule."
Brown's plans were ludicrous, said Vince Cable, the opposition Liberal Democrat spokesman on Treasury affairs, in an interview on Sky News.
"The Prime Minister is now talking about a private sector solution, but it doesn't involve private sector money," he said. "A private partner, and it looks like it will be Richard Branson, is being invited to come in and make a personal fortune.
"That is not sensible.
- BLOOMBERG