TWO American private-equity funds, Cerberus and Five Mile, are looking to take an equity stake in Northern Rock as part of a rescue package for the stricken mortgage bank.

The two groups are among a number of alternative asset managers that have expressed interest about investing in the bank after the government outlined a bond financing plan at the start of last week.

Cerberus and Five Mile, which had both separately looked at bidding for Northern Rock last year, would take equity stakes as part of a third tranche of equity funding under an independent rescue plan being drawn up by the bank’s management.

The board’s plan includes the support of leading shareholders, hedge fund SRM Global and RAB Capital, for a rights issue. This would raise between £200m and £250m in new equity with the majority coming from SRM.

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Citigroup, Merrill Lynch and ABN Amro have agreed to underwrite the remainder of the rights issue, which is likely to be about £1 billion.

Northern Rock’s board, chaired by Bryan Sanderson, believes attracting a third set of investors would allow the bank to present a credible financial plan to keep the bank as an independent listed group. Two weeks ago it called in Paul Thompson, the former investment banker and chief executive of insurer Resolution, to become its new chief executive if the group remains independent.

Bankers believe the board’s funding plan would also provide a benchmark in the auction of Northern Rock. This could put pressure on the two leading bidders - Olivant, led by former Abbey chief executive Luqman Arnold, and a consortium led by Sir Richard Branson’s Virgin Group - to offer better terms.

However, Cerberus and Five Mile could also be prepared to provide financial support to a winning bid by Olivant or the Virgin-led group.

Olivant has gained the backing of SRM and RAB since it would launch a rights issue at around Northern Rock’s current share price. In contrast, Virgin favours a discounted rights issue, but is working on revising the plans where it would cut its proposed stake after the refinancing to 45% from the original 54%.

Last week, the Treasury set a deadline of February 4 for bids.

Hopes of a private-sector deal were dramatically increased last Monday when the government agreed to sponsor a financing plan designed by the investment bank Goldman Sachs. Under the plan, the £28 billion in loans made by the Bank of England to Northern Rock would be replaced by bonds backed by the stricken bank’s assets and guaranteed by the government.

Bidders would pay a fee to the government for the guarantee. Details have yet to be announced, but there has been speculation that the fee could be about £400m. The government would also have a nonvoting equity stake in a move designed to ensure the taxpayer would have a share of any future profits.

The government financing package has sparked renewed interest from the US private-equity group JC Flowers.

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