THE Virgin-led consortium that is proposing an audacious rescue of the stricken mortgage bank Northern Rock is trying to recruit a heavyweight chairman to take charge of the board if its bid is successful.

Virgin, which is owned by the billionaire Sir Richard Branson, and its consortium, which includes AIG, the world’s largest insurer, and Wilbur Ross, the US restructuring specialist, are due to hold talks with Northern Rock’s board this week.

Among the individuals Virgin is thought to have short-listed for the chairman’s job are Sir Brian Pitman, the former chairman of Lloyds TSB, and Peter Ellwood, who was previously chief executive at the same bank and chairman of ICI. Other candidates are James Crosby, former chief executive of HBOS, the high-street bank.

The consortium, which has been preparing its bid for the past three weeks, said last Friday it was prepared to inject at least £1 billion into the bank in exchange for more than 50% of the equity and would keep it a listed company. But it faces competition from other bidders.

Among Virgin’s rivals is the private-equity investor Christopher Flowers, who has held talks with the Qatar Investment Authority (QIA), the emirate’s sovereign wealth fund. The QIA is thought to be prepared to provide £1 billion of finance. Other groups looking at a rescue

AIG has said it will provide equity and some of the £30 billion of debt finance required to take on Northern Rock’s mortgage book. Several banks including Barclays, HSBC, Bank of America and Citi are also thought to have approached Virgin to say they are prepared to offer debt finance.

Northern Rock is propped up by a £13 billion emergency loan from the Bank of England.

Branson’s plan is for Virgin Money – worth about £200m – to reverse into Northern Rock. Jayne-Anne Gadhia, who runs this operation, would take executive control at the bank. Adam Applegarth, its chief executive, is expected to leave.

The fight for the bank has pitted some of the world’s most powerful hedge funds against each other. Lansdowne Partners is said to have a short position, or a bet that the shares have further to fall, worth 10% of its market value. GLG Partners has a 3% short position.

RAB Capital has bought 6% and SRM, the hedge fund run by Jon Wood, has snapped up 4.5%. Wood is thought to have bought his stake when Northern’s shares were about 160p, making him around £21.4m already.

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