U.S. private equity firm Cerberus has dropped plans to bid for troubled British bank Northern Rock, because of the continuing turmoil in the global financial markets, The Times reported.
Cerberus' interest is thought to have been affected by credit-related losses at GMAC, the former financing arm of General Motors in which it now owns 51 percent, the paper said.
Discussions with potential suitors for Northern Rock are likely to continue until the deadline for emergency funding from the government expires in February, sources told The Times.
The bank's board will talk to leading shareholders before recommending a bid, the paper added.
"It doesn't matter what the board recommends – if shareholders think they'll get a better offer elsewhere, they'll hold out for it," a source close to the company said. "There's a long road to go."
Northern Rock shares fell more than 40 percent in morning trade and were suspended five times. They later recovered slightly. Cerberus had no immediate comment, the Associated Press reported.
The British government said Monday it was open to any measure to rescue the bank and that it could offer extra help to any potential buyer of Northern Rock beyond February.
But it would have to get the European Union's approval to continue funding beyond the deadline, as this would breach the EU's rules on state aid.
A sudden withdrawal of finance would force Northern Rock into a fire sale of its assets, sources close to the sale told The Times.
Northern Rock said Monday the value of the bids submitted so far was "materially below" the bank's Friday market capitalisation.