Virgin confirmed as favoured Rock bidder

As Virgin is announced as the preferred buyer for Northern Rock, Gordon Brown has pledged to protect the interests of taxpayers.

Under the Virgin deal, Sir Richard Branson's consortium would immediately repay £11bn of the estimated £25bn in Bank of England loans.

The remainder is expected to be repaid over the next two or three years on commercial terms.

It is understood that the Treasury, which could nationalise the bank if its shareholders block the takeover, has backed the Virgin offer.

The £105.3m bid values Northern Rock at less than a third of the lender's market value.
 
It would give Virgin a controlling stake in the group in return for £1.3bn of funds, with investors offered around 25 pence per share.

Speaking to business leaders on Monday, the prime minister said the government would "steer a course of stability" while protecting the interests of the taxpayer.

However, acting Liberal Democrat leader Vince Cable wrote to Bank of England governor Mervyn King to ensure taxpayers' money would be protected and repaid with interest.

"Taxpayers cannot be expected to continue to prop up this sinking ship, especially as much of our money is likely to get lost at sea," he said.

Virgin has pledged to keep Northern Rock's headquarters in Newcastle and said it would avoid any significant job losses.

Northern Rock chairman Bryan Sanderson described the bid as "very good news for Northern Rock".

However, some 100,000 of Northern Rock's small shareholders have raised concerns over a "fire sale" of assets.

In a letter to Sanderson, the Small Shareholders Association said they wanted an "independent, publicly-quoted" bank.

"We very much deprecate the driving down of the share price to meet expectations about future price, which seems to favour the interests of some potential bidders above existing shareholders," the letter said.