Buy-to-let mortgage lender Paragon said yesterday it was holding "exploratory" talks with parties interested in buying the company.

While Paragon did not name the possible suitors, a report said talks were being held with the US private equity giant Blackstone.

The report said the potential interest showed the buyout group may be ready to call the bottom of the credit crisis.

Paragon's market value has fallen by almost 90 per cent to £250m after the credit crunch restricted the Solihull-based company's ability to write new mortgages. And in January it was forced into a deeply discounted rights issue in order to repay a £280m bank facility.

However, it has remained upbeat about its franchise and believes tenant demand will continue to improve in an uncertain house market.

This was highlighted in a trading update last week, as it continued to operate profitably in the third quarter between April and June 30.