Taxpayers could end up propping up beleaguered mortgage lender Northern Rock for up to three years under takeover plans.
Private equity firm JC Flowers' offer is backed by £15 billion from banks, but it could take until the end of 2010 to repay the rest of the estimated £24 billion borrowed by the group, sources close to the deal said.
New York-based JC Flowers has a strong record of snapping up stricken financial companies and reviving them - often for big profits.
But shareholders are set to lose out if the offer goes ahead as Flowers will only pay a "nominal" amount for the business.
Shares yesterday lost a further seven per cent, closing 7.25p down at 97p.
JC Flowers is run by Chris Flowers, a former partner of investment bank Goldman Sachs who has built up an estimated £1 billion fortune.
If successful, the private equity firm plans to run the business as a going concern, keep the Northern Rock name and invest £1 billion in reviving the company's balance sheet.
Flowers has lined up former Marks & Spencer chairman Paul Myners to be the chairman of the company.
Other big-hitters in the Flowers line-up include previous Alliance & Leicester chief executive Richard Pym, who would become Northern Rock's interim chief executive.
JC Flowers, which declined to comment, is the only interested party so far to make an offer for the entire business.
Its plans to run the group as a going concern are likely to please Chancellor Alistair Darling, who was seeking a sale of the whole group.
But as the deal depends on taxpayers' cash until 2010, it could fall foul of European state aid rules, which increases the risk of the proposals.
Smaller investors - holding about 18 per cent of
the group's shares - are also likely to oppose the offer.
Northern Rock Shareholders Action Group spokesman Roger Lawson said: "Clearly on this basis we would not recommend it to shareholders - we would campaign against it."
A Treasury spokesman declined to comment on the latest bid, although Mr Darling stressed yesterday that the Government will have the final say over any rescue plans.
Other parties interested in the group include a Virgin-led consortium, which is looking to rebrand Northern Rock as part of the Virgin Money business.
The Chancellor was forced to step in to guarantee savers' deposits in September after soaring borrowing costs forced the lender to seek emergency funding - triggering the first run on a UK bank in nearly 150 years.