Bank rescue 'may take three years'

Private equity firm JC Flowers' offer is backed by £15 billion from banks, but it could take until the end of 2010 to repay the rest of the estimated £24 billion borrowed by the group, sources close to the deal said.

New York-based JC Flowers has a strong record of snapping up stricken financial companies and reviving them - often for big profits.

But shareholders are set to lose out if the offer goes ahead as Flowers will only pay a "nominal" amount for the business. Shares were trading below £1 and were 40% lower at one point on Tuesday.

JC Flowers is run by Chris Flowers, a former partner of investment bank Goldman Sachs who has built up an estimated £1 billion fortune.

If successful, the private equity firm plans to run the business as a going concern, keep the Northern Rock name and invest £1 billion in reviving the company's balance sheet.

Flowers has lined up former Marks & Spencer chairman Paul Myners to be the chairman of the company. Other big-hitters in the Flowers line up include previous Alliance & Leicester chief executive Richard Pym, who would become Northern Rock's interim chief executive.

JC Flowers, which declined to comment, is the only interested party so far to make an offer for the entire business.

Its plans to run the group as a going concern are likely to please Chancellor Alistair Darling, who was seeking a sale of the whole group.

But as the deal is reliant on taxpayers' cash until 2010, it could fall foul of European state aid rules, which increases the risk of the proposals. Smaller investors - holding around 18% of the group's shares - are also likely to oppose the offer.