Northern Rock bidder fears Virgin name

The "in-house" team hoping to lead Northern Rock to safety fears the government will favour rival bidder Virgin because voters may see it as the better option, the leader of the management proposal said.

The government wants an end to the crisis, which has damaged Brown's reputation for financial stability and gifted the Conservative Party the upper hand among voters. The bank owes taxpayers 25 billion pounds as a result of the government efforts to prop it up.

Paul Thompson, who would be chief executive under the in-house option, is concerned the public may regard Virgin, a household name for its airline and music businesses and colourful boss Richard Branson, as the only genuine private sector solution.

"I am worried," Thompson told Reuters in an interview on Wednesday. "I don't want them making the wrong decision just because the perception is wrong."

"I am not here trying to win a PR battle. I am here to make sure that the facts are right and therefore the perception is right and then people can make the right decision for the bank, the financial community, customers, voters and the taxpayer."

Since a third potential bidder, Olivant, pulled out of the auction on Monday, Northern Rock's biggest shareholders have rallied behind the in-house proposal.

Hedge fund RAB Capital, the second biggest shareholder in Northern Rock, said earlier this week there was only one "strong and independent solution available" and that was the in-house proposal.

"They should assume that they have our support," a RAB spokesman told Reuters.

DECISION

Thompson expects a decision from government by the end of the month, ahead of a March 17 European Commission deadline when emergency funding lines from government must cease.

Nationalisation still remains an option for the bank, and some analysts argue that any sale would be only a short term answer, eventually leading back to state-ownership.

Thompson disagreed, adding that, in any case, the two bids on the table were not wholly private sector solutions but private-public partnerships between bidder and government that would only become private after rescue loans had been repaid.

Olivant was said to have balked at the period in which it would have to repay the 25 billion pounds of government loans.

Thompson said both Olivant and Virgin had early access to the in-house salvage plan - a proposal which has been developed with the authorities.

"They had actually been involved in its development through the FSA and the Bank of England," he said.

"They have tested the plan and we have changed it in response to some of the things they have said so they are intimately familiar with its development."

Thompson confirmed a warrant had been factored into his plan and said a 5-10 percent return for government was not an unreasonable amount to expect.

Whoever takes over the bank will be faced with an unwelcome outlook of a softening economy and weaker housing market, near record levels of insolvencies and rising unemployment.

"We are all concerned for the outlook on the economy and the housing market, demand for mortgages will slow," Thompson said.