Luqman Arnold's Olivant is planning to offer taxpayers the chance to profit from a turnaround at Northern Rock, it emerged today as the investment firm tabled its formal proposal to take control of the stricken mortgage bank.

The former Abbey National boss has pledged to give the Bank of England the right to buy shares in the mortgage lender at a pre-agreed price, understood to be at about 150p.

Under the terms of Olivant's proposal, the Bank would be given warrants, which would give it the right to buy more than 5 per cent of Northern Rock immediately following a rights issue.

The Bank of England could then sell the shares on at a profit but it would be expected to pay more than the price of shares in the rights issue.

Northern Rock admitted yesterday that it has borrowed £25 billion in emergency funding from the Bank of England. As by far the bank's biggest creditor, the views of the Bank and the Treasury will be central to the success of a bid plan for the Rock.

Northern Rock shares edged 0.6p higher to 103.6p as details of Olivant's plan emerged this morning.

Olivant, which is being advised by Lazard, said it has received non-binding letters of commitment from five institutional Northern Rock shareholders, who collectively own 23 per cent of the bank.

RAB, the hedge fund and holder of 6.6 per cent of Northern Rock, has confirmed it is supporting the plan.

SRM Global, Northern Rock's largest investor, which holds over 9 per cent of the bank, is also understood to be among the five supporting holders.

Other top ten shareholders include Legal & General Investment Management, Axa and Morley.

Morley, owned by Aviva, is understood to have its holding through passive funds that track the index and is not involved in underwriting any shares issue.

The Northern Rock Shareholder Action Group, whose individual members account for about a further 30 per cent of the holdings, also threw its weight behind Mr Arnold's plan.

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