Citigroup offers to fund Northern Rock buy-out

Mumbai: Investment bank Citigroup has offered to provide funding to potential buyers of Northern Rock even as advisors of the ailing British bank are in talks with US buyout firms JC Flowers and Cerberus over a rescue bid, sources familiar with the developments said.

Citigroup was appointed as an advisor to Northern Rock in order to provide financing to potential suitors, the sources said, adding that Northern Rock was also working with other banks to provide similar lines of finance.

Newspaper reports, meanwhile, said Citigroup would offer funding of "significantly more than 5 billion pounds" and possibly double that amount, to show that Northern Rock can still raise funds.

The funding is likely to be available at a similar rate to what other banks are refinancing at in the market, it said.

News that financing is becoming more available, coupled with interest from more than one potential suitor, lifted Northern Rock's shares more than 10 per cent over a 12 per cent rebound yesterday.

By 0825 GMT, Northern Rock shares were up 8.7 per cent at 165 pence, having touched 169p. The shares have rebounded from a record low of 112p on Tuesday, but are still down over 75 per cent in the past month, valuing the bank at about 700 million pounds ($1.4 billion).