Richard Branson's Virgin Group and US buyout firm J.C. Flowers are the two front-runners to buy ailing Northern Rock, sources said today, but shareholders are unlikely to get much from either.
A consortium led by Virgin would launch a deeply discounted share placing for Northern Rock that would value its shares at between 20 pence and 40 pence each, according to the Sunday Times newspaper. The shares closed at 85.9p on Friday.
The J.C. Flowers proposal includes a "nominal" offer for the shares, it was reported earlier this week.
The Virgin and Flowers proposals are top of the list of offers being considered by the Northern Rock board, its advisers and Britain's Treasury, and a preferred bidder could be announced in the next three days, people familiar with the situation said.
The Sunday Telegraphsaid Warren Buffett, the renowned US investor, has held talks with three of the potential bidders for Northern Rock with a view to joining one of the consortiums.
Northern Rock, Virgin and J.C. Flowers all declined to comment.
Northern Rock has been engulfed in crisis since it was unable to raise funds in financial markets and the Bank of England stepped in to offer it emergency loans in mid-September.
It is estimated to have borrowed at least 25 billion pounds ($51.4 billion) from the bank, leaving refinancing of the loan a key issue for potential buyers as turmoil in financial markets could make it an expensive and difficult task.
Swiss bank UBS has a total stake of 6.2 percent in stricken Northern Rock, having acquired shares in October and November, according to the Sonntagnewspaper today.
The newspaper reported that UBS London had acquired a 5 per cent stake on October 10th at about 270 pence per share. The branch then increased the stake to 6.2 per cent on November 12th for a price of 154 pence per share.