Sir Richard Branson's Virgin Group is not planning additional sweeteners to Northern Rock's shareholders as it prepares to submit its business plan for the stricken bank by a government deadline today.

Northern Rock's two largest shareholders, the hedge funds RAB Capital and SRM, have both made clear that they will vote against Virgin's bid if it does not propose a better deal for the bank's investors.

Virgin's plans call for Sir Richard and a group of investors to inject £650 million of their own cash into Northern Rock, and then to raise an additional £650 million through a rights issue that will dilute existing shareholders' stakes.

Rather than tweak the proposal to try to get RAB and SRM on board, Sir Richard has decided to ignore their demands, believing that the Government will select what it believes is the best business plan for taxpayers and Northern Rock depositors.

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Virgin is vying with Olivant, the private equity group run by Luqman Arnold, the former head of Abbey National.

The two suitors are set to submit their business plans by close of play today, alongside a third proposal from Northern Rock itself, which feels it has a future as a standalone entity. Shares in Northern Rock rose 8.59 per cent to 104.25p towards the end of afternoon trading in anticipation of a deal.

Paul Thompson, a non-executive director of Northern Rock who is leading the bid, is understood to have raised £400 million from third parties.

Sources have said that the bidders will have to play a delicate balancing act between putting in the right amount of equity to ensure a decent return and having enough money left over to pay the Government a fee for providing a guarantee against Northern Rock's £26 billion debt pile.

In addition, they will have to come up with a proposal to satisfy Gordon Brown's request that the Government make a profit on the deal by taking a non-voting equity stake in the bank.

One source close to Northern Rock said: "They [the bidders] will have to tell them [the Government] how much can be paid in fees and still provide an attractive proposal for new equity holders to come in. The more the Government charges, the less attractive the business."

The Government lifted a massive stumbling block from the bidders by agreeing to slice up Rock's debt and sell it off as bonds, guaranteed by the Government as if they were gilts.

However, in so doing, it risks falling foul of EU state-aid guidelines, which dictate that a new owner must not have a competitive advantage.

"In other words, if the business stays as it is and survives and thrives through a Government handout, it won't get approval," the source said.

For that reason, the three bids are expected to include highly risk-averse business plans, which are likely to involve job cuts and a balance sheet restructuring that will shrink Northern Rock's business in the short term while it reorganises itself.

However, sources close to Virgin and Olivant have said that they both plan to expand Rock's business again over time.

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Asset stripping awaits! If I were in the Northern Rock offices, I'd want to keep hold of my laptop! This degree of government interference is a form of nationalisation through the backdoor.

Stephen Pain, Odense, Denmark

Surely the sensible wat forward in the short term is for Northern Rock to stop lending money for Mortgages. Package some mortgages for sale in the Wholesale Markets and reduce staffing costs. But in the long term the bank must build-out using both Branch network and internet offerings to generate saver depositis, just like a building society would. The wholesale markets are too sensitive to global issues, and banks are themselves too greedy, the 'having the cake and eating it brigade'. Olivant would seem to have a better deal for share holders, but I really think that if the current management are allowed to trade their way but to health, this would be the best long-term option for Safers, Share holders, the Government and the Staff.

Gary Wilson, Disley, Cheshire

When one pays out considerable sums of money to big name advisors and financial experts, especially when the payee, (HMG), is in a state of petrified fear, one must expect them to come up with complicated and restrictive solutions so that they can be seen to have earned their money. The bonds plan would appear to have been put in place to avert an unlikely veto by the EEC of the existing loans to the Northern Rock. With HMG already demanding hefty fees, the bidders now have to agree to "performance warrants" so that it can share in any financial recovery. Northern Rock must now be seen as a rather unappetizing prospect and it can hardly be a surprise to find that there are no takers apart from the three original names (we think) and that they all expect to downsize of the mortgage book. What kind of business plan is that, with staff redundancies never cheap and morale bound to plummet whilst HMG hovers expecting to participate in any financial improvement in the company? Will it occur?

Ralph William Gunn, London, United Kingdom