Citigroup is ready to provide well in excess of £5 billion in financing to ease the way for a takeover of Northern Rock.

It is understood that at least four serious bidders remain in the auction of the troubled Newcastle-based bank, including JC Flowers & Co and Cerberus, the American private equity firms.

The bidders are due to meet Northern Rock’s management and continue due diligence this week.

Given the scarcity of banks able to provide multibillion-pound liquidity lines in the current credit crisis, Northern Rock was thought to be concerned that one bidder would tie up most of the City’s advisers, depriving rival acquirers of funding.

To level the playing field, Citigroup has been brought in to provide financing to bidders.

It is thought that it is ready to offer significantly more than £5 billion in funding.

The credit line provided by the American banking giant will be secured in part on Northern Rock’s mortgage assets.

The final terms of the deal are still being hammered out, but it is thought that Citigroup will also provide some advisory services to the Rock.

A source said: “Although the Bank of England is providing liquidity, it’s important that Northern Rock is seen to be able to secure its own funding for a deal.”

Northern Rock has borrowed about £8 billion in the weeks after it secured an emergency, unlimited credit line from the Bank of England.

It is thought that the bank has stabilised its business, after a £2 billion run on its coffers, and the need for an immediate sale is less pressing.

The Bank of England has agreed that a buyer would assume the credit line given to Northern Rock, which charges a penal rate of interest.

Rival banks have shied away from a takeover because of uncertainty in themortgage market and fears that the Rock brand is irreparably damaged.

Northern Rock said yesterday that Legal & General, the fund manager, had raised its stake in the bank to 4.05 per cent, as shares in Northern Rock closed up 12 per cent at 151.8p on hope of a bid.

The Northern Rock Foundation, a charity set up in 1997 when the bank demutualised, has appointed Europa Partners, the corporate finance boutique, as financial adviser in an attempt to head off a fire sale of Northern Rock.

Alastair Balls, chairman of the foundation trustees, said: “Whilst we understand the need for an early resolution to the bank’s operational difficulties, we are concerned that a transaction is not concluded on unfavourable terms, simply to meet a self-imposed timetable, to the detriment of the charity, its work and jobs in the North.”

The foundation holds a nonvoting stake in Northern Rock that would convert into a 15 per cent holding in the bank in a takeover. The foundation’s presence is seen as a potential poison pill to an acquisition attempt.

Mr Balls said that the foundation would write to ministers and MPs to “emphasise that the work of the foundation and its importance to millions of people in the North must be taken into account in the negotiations over the future of the bank”.

The foundation receives 5 per cent of Northern Rock’s annual pretax profits but operates independently.

It is one of the UK’s largest charitable funders, providing more than £155 million in grants and other investments over the past ten years.

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