Olivant, Luqman Arnold's investment firm, is poised to table the terms of its formal proposal to take control of Northern Rock, the stricken mortgage bank, first thing tomorrow morning.

The firm, set up and run by the former Abbey National boss, is understood to be close to finalising its documents. It is thought Olivant will make a formal statemment early tomorrow.

Olivant's bid, boosted in the past days by the naming of Lehman Brothers as broker, comes as Northern Rock admitted that it had borrowed £25 billion from the Bank of England.

The admission by the embattled Tyneside lender is its first acknowledgement of the size of its borrowings.

"We are confirming that Northern Rock's share of the Bank of England lending is around £25 billion," a spokeswoman said.

The Rock denied it was behind a further £5 billion of loans by the Bank disclosed in its accounts as "other assets" earlier this week.

It is understood that the Bank has also carried out transactions with the UK Government, foreign central banks and international financial institutions. It confirmed the £25 billion figure but declined to comment further.

The Olivant team, one of at least three serious candidates to win control of the Rock, was putting the finishing touches to its proposal this morning. It had originally been tipped to submit its terms later today.

Shares in Northern Rock gained 2 per cent, up 2p at 102p, as competition to secure the mortgage bank intensified.

It is thought Lehman will be instrumental in Mr Arnold's plan to buy 15 per cent of the Rock at market prices and then parachute in a management team he will lead.

Northern Rock, in financial freefall since being forced to go to the Bank its funds, has named Sir Richard Branson's Virgin Group as its preferred buyer.

However, aided by pressure from the Treasury in recent days, rival bidders for Rock have received more serious consideration from the bank's management and advisers.

The Government, through the Bank of England, is by far Northern Rock's biggest creditor.

As well as Virgin and Olivant, the American buyout groups JC Flowers and Cerberus are also interested in buying the mortgage bank. Cerberus is thought to be using Jonathan Bloomer, former chief executive of Prudential, the insurer, to front its bid.

All the bid proposals involve paying off a large slice of Rock's Bank of England debt straight away. Each bidder except JC Flowers is likely to turn to Citigroup, Deutsche Bank and Royal Bank of Scotland for funds of up to £15 billion.

Banking sources said last night that the commercial banks involved had no preference over which party would receive the loans.

Olivant's proposal has won support from leading Rock shareholders, who under its plan would be left with 85 per cent of the bank and therefore the biggest chance to benefit from a recovery.

Olivant, which is marketing its plan based on Mr Arnold's turnaround expertise, is planning to embark on a rights issue, thought to be for about £500 million.

SRM Global and RAB Capital, the hedge funds which are Northern Rock's two largest shareholders, are thought to have offered to guarantee take-up of a portion of a rights issue.

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