GMAC, Branson eye rescue of British bank, reports say

The U.S. financial services group GMAC will spearhead a rescue bid for Britain's struggling mortgage bank Northern Rock PLC, a newspaper reported Sunday.

General Motors GM created GMAC to finance vehicle sales and retains 49% of it. GM sold 51% of GMAC to Cerberus Capital Management and other private-equity firms in November.

The Sunday Times said GMAC will play a pivotal role in a bid being put together by Cerberus. The paper said Cerberus is one of three bidders now examining Northern Rock's books for possible takeover bids.

The others are the U.S. private equity firm J.C. Flowers & Co. and Richard Branson's Virgin Group.

The newspaper did not identify the source of its report. Both GMAC and Cerberus declined to comment Sunday.

Another newspaper, The Sunday Telegraph, reported that J.C. Flowers & Co. is demanding that Britain's government offer insurance against any legal action that could arise from a Flowers' takeover and underwrite any new mortgages written by Northern Rock.

Northern Rock has been Britain's biggest casualty of the global credit crunch. The mortgage lender ran into trouble last month because of its heavy reliance on short-term money markets for funding. Its subsequent profit warning and appeal to the Bank of England for an emergency loan led to the first run on a British bank for almost a century.