Diehard retail investors in Northern Rock Plc will be asked to invest about £770 (US$1,600) in the company if a proposed Richard Branson-led rescue of the stricken mortgage bank proceeds.

The Virgin consortium's proposals include a rights issue to raise £650 million (US$1.35 billion) at 25 pence per share, equivalent to asking Northern Rock's original shareholders to buy about 3,080 new shares, according to Reuters calculations yesterday.

When the mutually owned Northern Rock Building Society listed in London in October 1997, it handed 500 shares apiece free to each of 885,764 qualifying investors and borrowers, according to its website.

Some people qualified on both counts, got 1,000 shares and were doubly happy when Northern Rock shares closed at 463 pence on their first day of trading - October 1, 1997.

Billions in new shares

The Virgin consortium's pro-posed rights issue would result in 2.6 billion new shares being issued, just under 6.2 new shares for every existing Northern Rock share, or about 3,080 shares if such investors still own the 500 shares given in 1997.

Northern Rock would not say how many 'small investors' it has, but the figure is widely believed to be well over 100,000.

Meantime, Britain has asked the European Commission to approve the aid it has provided to the struggling mortage lender, a commission spokesman said yesterday.

"Last night, the British Government notified us," EU competition spokesman Jonathan Todd said.

The move came hours after European Competition Commissioner Neelie Kroes met British Finance Minister Alistair Darling.

Rescue aid

"In the meeting, the com-missioner said the sooner they notified the details of the aid, the sooner we can look at it in detail and we will try come to a decision as soon as possible," Todd said.

The British Government has lent Northern Rock an estimated £25 billion (US$52 billion) since the lender ran into financial difficulties in September, as credit markets dried up.

Branson's Virgin Group has been declared the preferred bidder for Northern Rock, with a promise to repay the government £11 billion immediately on the sale going through.

Under EU rules, governments are allowed to offer rescue aid to ailing companies under strict conditions, or restructuring aid on condition that the company undergo sufficient restructuring that it does not require further assistance.

In both cases, the aid must be approved by the European Com-mission, Europe's top competition regulator. Aid judged illegal has to be repaid to the government.

- Reuters