Northern Rock contender unveils £650 million rights issue plan as another reportedly walks away from helping the troubled bank.

Former Abbey CEO Luqman Arnold wants its Olivant vehicle to raise between £450 and £650 million as part of his plan to turn the stricken mortgage lender around.

Olivant said in a statement on Friday that it had already received commitments to participate in the rights issue from five Northern Rock shareholders accounting for 23% of the group's stock.

The issue would be priced 'at or around' the share price in the market at the time, it said.

Olivant plans to invest £150 million itself in Northern Rock shares once the rights issue is completed. It plans to raise debt finance to repay £10-15 billion of Northern Rock's emergency borrowing from the Bank of England, currently estimated at £25 billion.

The Northern Rock brand would be retained, added Olivant. Arnold would become executive chairman.

Meanwhile, US private equity firm JC Flowers has walked away from the bid auction for Northern Rock, according to reports.

It is understood that JC Flowers cannot find a way to deliver shareholder value while meeting its own investment return goals. Reports suggest, however, that it will leave its current takeover proposal on the table.

JC Flowers had proposed buying Northern Rock and taking it private, investing £1 billion in the bank to fund future growth, and repaying Bank of England's emergency loan over three years.