US buyout firm JC Flowers submitted an offer for Northern Rock, according to a person familiar with the situation, as shares in the stricken British bank tumbled on fears that any offers will be low.
JC Flowers ' proposal includes an offer to Northern Rock shareholders at a "nominal value", the person said.
Northern Rock shares fell as much as 42 per cent earlier today due to mounting concern that shareholders will not get much value from their holdings, but by 11.40am the shares had pared some of their losses and were down 10.8 per cent at 93 pence, valuing the bank at £390 million pounds.
JC Flowers ' proposal includes the repayment of £15 billion in emergency loans to the Bank of England, and the repayment of further borrowing estimated at £10 billion over time, probably by the end of 2010, the person said.
It would take the business private and inject at least £1 billion in new investment to support the bank's balance sheet and underwrite a new business plan. It would keep the Northern Rock name and presence in the northeast of England, he said.
Britain's Treasury said yesterday it would be partial to bids that minimised government involvement, and would be willing to extend help for potential buyers beyond a sale or past February as long as it satisfied European Union law and the government's own fiscal rules.
The government has also said its guarantee would be maintained as long as market conditions persisted. The Treasury said today there would be a minimum of three months notice before lifting any guarantee.
None of the offers that had been received by Monday were for all the bank and all valued the equity at "materially below" its value at the end of last week.