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Shares in Northern Rock have lifted following rumours that a US investment bank is prepared to offer financing to companies interested in the lender.

Citigroup is ready to provide potential Northern Rock bidders in excess of £5 billion to pave the way for a takeover of the troubled bank, the Times reported today.

The paper claimed that the credit line offered by the investment bank would be secured in part on Northern Rock's mortgage assets.

"Although the Bank of England is providing liquidity, it's important that Northern Rock is seen to be able to secure its own funding for a deal," an unidentified source told the Times.

Following the report Northern Rock shares were up by 8.7 per cent at 165p by 09:25 BST.

While the lender's share price has rebounded from the record low of 112p it reached on Tuesday, the value of stock in the company has still plummeted by more than 75 per cent since it emerged that it had asked the Bank of England to provide it with emergency funding last month.

Cash-flow problems faced by Northern Rock in the wake of an ongoing global credit crunch forced the company to make the plea, prompting a damaging run on the bank.

Northern Rock's status as an independent company is now widely thought to be untenable, with the bank confirming last week that it was in "preliminary discussions with selected parties" over its future.

The US private equity groups JC Flowers and Cerberus are rumoured to be among four groups interested in buying all or part of Northern Rock.

However with a buyer for Northern Rock yet to emerge, small shareholders are understood to be against a swift sale of the lender on the grounds that they could face further losses if the bank is sold at a heavy discount.

Yesterday the Northern Rock Foundation, a charity which receives five per cent of the group's annual pre-tax profits, urged the bank's advisers and the government to avoid a fire sale.

© Adfero Ltd