Olivant, one of the two main suitors for Northern Rock, has said it will pull out of the auction for the stricken mortgage lender unless the bank's board agrees to recommend a bidder by Christmas.
In a letter to Northern Rock's board, Olivant demanded that the company sould decide between its proposal and the rival interest from Sir Richard Branson's Virgin Money consortium in the next 11 days.
Olivant also said it would quit the race if it did not get equal access to the banks lined up to fund whatever solution is found to Northern Rock's crisis.
The ultimatum from Olivant, headed by former Abbey National boss Luqman Arnold, came after Northern Rock indicated it would wait until mid-January to decide between bids. Mr Arnold has said he is ready to run the bank immediately, and that any delay would weaken Northern Rock's bisiness. Northern Rock is expected to issue a trading update as early as today, saying the sale process will grind on into the new year.
The Liberal Democrats attacked Sir Richard Branson's proposed bid yesterday. Vincent Cable, the Liberal Democrats' acting leader, said that giving Virgin preferred bidder status was a mistake.
"Branson in particular is the front man for a consortium of hedge funds and private equity operators whose aim is to make a killing from a highly leveraged acquisition," Mr Cable told the House of Commons.
Northern Rock's trading statement is not expected to give major details about its business or its depleted deposit base.
Mr Cable stepped up his campaign to get the bank nationalised, saying it was "bleeding to death" while the Government insisted on a full health check. Mr Cable said the sale process was futile because with the markets frozen neither Virgin nor Olivant would be able to raise the money needed to do a deal.
Mr Cable claimed he had been told by an adviser to one of the bidders that hundreds of Northern Rock call centre staff were sitting reading books and magazines because they had nothing to do. "Nothing can be done until Northern Rock is stabilised. The Government and the regulatory authorities have fallen flat on their faces. They must pick themselves up and retrieve the situation by nationalising Northern Rock now," Mr Cable said.
Northern Rock's shares fell 5 per cent yesterday after it was ejected from the FTSE 100 index. Its shares have fallen 92 per cent this year.
HBOS, Britain's biggest mortgage lender, will also give an end-of-year trading update today.Reuse content