Virgin Money set to land Rock as interest from Flowers wilts

sir Richard Branson’s Virgin Money today looked to be in pole position to land Northern Rock as the auction of the nationalised lender nears its conclusion.

Final bids for the Newcastle-based bank are due this week, with reports that Virgin will pip buy-out vehicle NBNK to the prize.

The sale is likely to crystallise a loss of at least £400m for taxpayers, who pumped in £1.4bn after the bank’s collapse four years ago.

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Meanwhile, Lloyds Banking Group is expected to veto a straight sale of the retail banking business that it must spin off to meet competition rules.

A Sunday newspaper said a stock market flotation of the Project Verde business, which includes 632 branches, was now a near certainty.

It is another blow for NBNK, which was the only remaining bidder after placing a valuation on Verde of less than half its book value, or £1.5bn. NBNK, which is led by Lord Levene and former Rock chief executive Gary Hoffman, viewed the Lloyds branches as the base for a move on Northern Rock, which it believes would be too small to survive as a stand-alone bank.

Virgin’s other rival for Northern Rock, the American private equity firm JC Flowers, is reportedly on the brink of dropping out of the bidding process.

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Virgin is backed by Wilbur Ross, the billionaire Wall Street investor, as well as an Abu Dhabi investment fund and a large British pension fund.

The current eurozone financial crisis, which has led to fears over the stability of the European banking system, is likely to have drained the appetite of bidders for both banking operations.

Lloyds has reportedly been told by its advisers that a flotation of the business in November 2013, the deadline for the dives- titure, offered the best pros- pects.