Bradford & Bingley not eyeing N.Rock

By Marc Jones and Clara Ferreira-Marques

LONDON (Reuters) - The country's biggest buy-to-let lender Bradford & Bingley (B&B) has denied a report it is considering a bid for part of Northern Rock, as the government said all options for the troubled bank remained open.

A report that B&B was interested in buying some of Northern Rock's assets, sent shares in the beleaguered mortgage bank up as much as 7 percent early on Wednesday.

"Contrary to reports, Bradford & Bingley is not actively pursuing a bid for any part of Northern Rock," a B&B spokeswoman said, though she said B&B was one of several parties which had received a copy of the Northern Rock briefing memorandum.

A source familiar with the matter said B&B was one of a group of interested parties which looked at Northern Rock's mortgage book in the early part of the auction process, though it was unclear whether it remained interested.

Northern Rock declined to comment.

Britain's fifth-largest mortgage lender and now the country's biggest casualty of the global credit crunch, is being sold off as a whole, but the process has been thrown into doubt in recent weeks after some suitors withdrew and others hit funding troubles.

At least two high-profile suitors remain -- investment group Olivant, led by former Abbey boss Luqman Arnold, and Richard Branson's Virgin. Should a deal fail, the bank could face nationalisation or a wind-down and breakup, in which case its assets would be split up and sold to rivals such as B&B.

The government has said it prefers a private sector solution, but is facing growing speculation that it could be forced to nationalise the former building society.