Banks asked to bail out £1bn Olympics village

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Ministers are poised to intervene after the village project hit trouble because Australian developer Lend Lease could not raise the necessary finance.

Banks have been reluctant to commit because of the credit crunch and uncertainty over the value of the village when it is sold as apartments by Lend Lease after the Games.

But the Olympic Delivery Authority is expected to assure banks that any loans to Lend Lease will be repaid. Ministers are also considering redrawing the whole contract.

Instead of developing and then, in effect, loaning the village to the ODA, Lend Lease could be asked simply to build the project on the Government's behalf. This would mean that the project would be entirely public funded.

Lend Lease had agreed to fund the construction of the village in exchange for taking the profits on apartment sales after 2012. The ODA, which is aiming to have a new provisional agreement with Lend Lease by the end of July, is still likely to have to use some of its £2billion contingency funding in the scheme.

John Armitt, the ODA chairman, said that should any public funding be necessary, the Government would share future property sale receipts with Lend Lease.

A spokesman for the Department of Culture, Media and Sport said: "We are working to resolve outstanding issues with Lend Lease, at the same time ensuring that work on the village site continues without delay and is completed on schedule."