Q: How would the new refinancing plan work?

Northern Rock would sell newly issued bonds to investors, using the proceeds to pay back the Bank of England. The bonds would be guaranteed by the Government, making them as safe as gilts. Northern Rock would pay a fee to the Government for the benefit.

Q: How does this help?

It means private sector investors would replace the public sector as provider of at least some of Rock's debt capital. It would provide Rock with stability of financing for several years, giving rescue bidders the confidence to proceed with offers.

Q: Are taxpayers off the hook?

No. In the event of a rescued Rock still failing, the Government would have to repay interest and capital on the bonds. But they might benefit if the rescue is a success if, as the Treasury hopes, it shares in some of the upside.

Q: What does it mean for shareholders?

It makes a private sector rescue more likely, though nationalisation is still a very real possibility. Private sector bidders would no longer have to negotiate their own £15 billion debt packages, which was proving impossible because of the credit crunch.

Q: What about depositors?

It makes no difference. Their savings are guaranted by the Government whatever happens.

Q: Will the deal fly?

Maybe - the bonds would be attractive to investors because of the Government guarantee. But there is a question mark over whether this constitutes unfair state aid. Brussels would need to approve it.

Q: Any other drawbacks?

Bond issues of £25 billion could soak up a lot of the appetite for sterling bonds, potentially making it more expensive for other companies and the Government to borrow in the bond markets.

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