Top bank bids to help Rock sale

The two rival bidders, one led by Sir Richard Branson's Virgin Group and the other by investment company Olivant, are struggling to raise the finance needed to buy out the troubled high-street bank.

Difficulties in finding finance are threatening the deal, so Goldman Sachs - the Government's advisers in the sale - has been asked to assemble backers and stave off the need for the Treasury to nationalise the Rock.

Goldman Sachs has been given until mid-January to come up with a solution, sources said.

Virgin's consortium was named as Northern Rock's preferred bidder three weeks ago, but Olivant's plans are more popular with shareholders.

Olivant had threatened to pull out of the running after the beleaguered lender blocked its efforts to hold talks with a consortium of banks putting up loans of up to £15 billion to finance a rescue bid.

The Virgin team would pump £1.3 billion into the ailing business in return for a 55% stake and diluting the value of investors' holdings. Two hedge funds which together bought a 16% stake in the company have threatened to oppose the plans.

Olivant would not make a formal offer for the group, but take up a minority stake and parachute in a heavyweight management team quickly to turn around the company's fortunes.

Northern Rock was at the centre of the first run on a UK bank for nearly 150 years in September because of soaring borrowing costs in the money markets where it borrowed the lion's share of its cash for mortgage lending.

Adam Applegarth, who oversaw the aggressive growth of the firm to become the UK's fifth-biggest mortgage lender, stepped down as chief executive on Thursday.