UK widens search for N. Rock rescue: sources

LONDON (Reuters) - The British government is trying to widen the net for potential rescuers of stricken bank Northern Rock NRK.L and is seeking help from backers in Asia and elsewhere.

A person close to the deal told Reuters on Thursday that Goldman Sachs (GS.N), the U.S. investment bank advising the government on Northern Rock's options, was now seeking investors in China and the Middle East to help fund a takeover.

Another source close to the matter said the investment bank was also considering a plan to convert the Bank of England's loans to Northern Rock into bonds for sale to investors.

Northern Rock is Britain's biggest casualty of the global credit squeeze and has borrowed about 26 billion pounds ($51 billion) from the Bank of England since it was forced to seek emergency funding in September.

Finance minister Alistair Darling said finding a private-sector solution was still the government's preferred option but it and Goldman were keeping options open.

Nationalization remained an option, he told parliament's Treasury committee, but signaled that state-ownership -- which could see shareholders get nothing -- would only be a temporary measure before the bank could return to the private sector.

Goldman Sachs would be looking for the "optimum financing package for the sale of the company" as part of its goal to resolve the Northern Rock crisis "as quickly and efficiently as possible," a spokesman for Prime Minister Gordon Brown said.

The government's attempts to find a rescuer to pay back the loans and revive the business have mostly focused on two consortiums, led by investment groups Virgin and Olivant.

But extended turbulence in credit markets has raised concerns the suitors will struggle to finance a deal and the government could be forced to nationalize the bank.

The prospect that more funding could aid a deal helped lift Northern Rock's battered shares. They were up 7 percent at 96 pence around midday, lifting the bank's market value to 395 million pounds -- still less than one-tenth of its value a year ago.

OPTIONS EAST?

The money that Goldman is seeking from investors in China and the Middle East would be in addition to the 15 billion pounds that could be available from Deutsche Bank (DBKGn.DE), Royal Bank of Scotland (RBS.L) and Citigroup (C.N) to help fund a rescue bid, one of the sources said.

The other source said that converting BoE loans into bonds was a possibility, but that no decision had been taken.

Goldman, Northern Rock and the Treasury declined to comment.

The government's options over Northern Rock are being complicated by the bank's two biggest shareholders, who have warned against a fire-sale of the business and forced Northern Rock to convene an investor meeting on January 15.

An announcement about the financing could be made before then, sources said.

Darling said shareholder rights were important, but the government's priority was on safeguarding depositors and the taxpayer. "We want to make sure that we get the money back that the Bank of England has lent," he said.

Citigroup and Blackstone, the U.S. private equity firm with a significant presence in China, are advising Northern Rock.

(Additional reporting by Steve Slater, Mark Potter, Fiona Shaikh and Miyoung Kim; Editing by Quentin Bryar)