Two hedge-fund firms that are the largest shareholders of U.K.-based bank Northern Rock are backing a proposal from private investment company Olivant over one from Virgin Group as returning the best shareholder value.

Olivant said in a statement that its rescue package price tag comes in at £800 million ($1.6 billion): £150 million in cash with the additional £650 million to come from a stock issuance.

Hedge fund firms SRM Advisers and RAB Capital, which are the first and second biggest bank shareholders respectively, prefer Olivant proposal since it offers greater protection to shareholders, a person familiar with the situation said.

Northern Rock has already said that it prefers Virgin Group’s proposal, which would inject £1.3 billion into the struggling bank.

Northern Rock was hit hard by the summer’s credit crunch and had to go to the U.K. central bank for a credit line. Depositors lined up to take back their money when the news broke.

U.S. private equity firm, J.C. Flowers & Co., which was said to be in talks with the U.K. treasury about its bid for the bank has decided that it doesn’t want to go forward as the deal stands now.

The J.C. Flowers’ team doesn’t believe that shareholders have any value in a bank that, but for political pressure, would have been in administration months ago, according to someone familiar with the company’s thinking.

A spokesman for Virgin Money, which will manage Northern Rock’s turnaround process if that bid is successful, said that Virgin’s ability to put more money in made it the more viable choice.

“Shareholders have to weigh up whether taking some value from the Virgin is better than going into administration,” the spokesman said.