The magic circle firm, a longstanding panel adviser to Virgin, was recently appointed to advise on the approach by the consortium, which is led by Branson and includes insurance company AIG Financial Products and hedge fund group Toscafund.
Corporate managing partner Andrew Ballheimer is leading the A&O team on the proposed rescue package, which was announced on Friday (12 October).
Josh Bayliss, Virgin’s general counsel, told Legal Week the instruction did not create any conflict despite A&O already having a role advising Northern Rock on its emergency funding facility from the Bank of England.
He said September’s liquidity injection from the Bank of England - on which banking partner Trevor Borthwick is advising - is a completely separate transaction to Virgin’s bid so does not create any conflict of interest.
A&O also took on a role advising the underwriters on a £20bn securitisation programme for Northern Rock in 2005.
Earlier this month Freshfields Bruckhaus Deringer sparked controversy when it emerged that it had taken on a role advising Northern Rock despite the firm’s longstanding links with Bank of England – now advised by Clifford Chance.
Other firms with roles include Slaughter and May, which is acting for the Treasury; Herbert Smith, which is acting for rival bidder JC Flowers; and Bingham McCutchen, which is advising a group of bondholders on their position.
Linklaters is also thought to have had an early role advising regular client Lloyds TSB on its initial interest in the bank.