UPDATE 2-Virgin to sweeten Northern Rock deal - report

(Adds comments from Richard Branson in New Delhi)

LONDON/NEW DELHI Jan 20 (Reuters) - Virgin Group will try to win over shareholders with a sweetened bid for Northern Rock on the eve of a speech by the British Chancellor to Parliament about the struggling UK bank, an unsourced Sunday Times report said.

Chancellor Alistair Darling is set to tell the House of Commons on Monday he will give bidders for Northern Rock NRK.L -- Virgin, investment group Olivant and an in-house proposal from its own management -- two weeks to present their financing plans and their management teams, the Sunday Times said.

Darling will stand up in front of MPs at 1530 GMT to tell them about a financial plan to convert Northern Rock's debts into bonds, which will increase the hopes of a private-sector rescue for the bank.

A statement from the Treasury about Northern Rock is expected at 0700 GMT on Monday, a Treasury spokesman said.

"I believe we will save by far and away the most jobs," Virgin Chairman Richard Branson told journalists in New Delhi, India, as he accompanies Prime Minister Gordon Brown on a trip to Asia.

"I believe that our offer capitalises the company in the largest way ... I believe we have the best management team," said Branson.

Responding to criticism from the Conservative party that Branson's relationship with Brown put Virgin in a favoured position Branson said he only had one short chat with the prime minister on the subject.

"When he was walking down to tell the press about the Goldman Sachs' approach he mentioned it to me all in 30 seconds and that was it," said Branson.

The UK government plans to back the proposal by advisers Goldman Sachs (GS.N) to convert loans of around 25 billion pounds ($49 billion) to Northern Rock from the Bank of England into bonds, which can be sold on to private investors. See [ID:nL19252033]

Virgin is prepared to cut its proposed stake in the bank from 54 percent to 45 percent, the Sunday Times report said, without naming sources.

Virgin and its consortium intend to inject 650 million pounds into the group and are looking to obtain a further 650 million pounds from existing investors through a rights issue, to be underwritten by investment bank Morgan Stanley (MS.N).

Asked whether the presence of Branson on his trip to Asia meant it would get a "sweetheart deal" on Northern Rock, Prime Minister Gordon Brown told a news conference in New Delhi earlier that any negotiations would be taking place in London.

"And I repeat that all options are under consideration and that includes the public ownership of Northern Rock and that will be a decision that will be made once the negotiations are moving forward and we see what are the results of the discussions that are taking place," said Brown.

"So we'd be failing in our duty if we did not look at the commercial offers that have been made."

A spokesman for Virgin said: "The only thing we're thinking about at the moment is the financing issue."

Northern Rock did not wish to comment.

(Reporting by Chris Wills, additional reporting by Adrian Croft in New Delhi, Steve Slater and Jennifer Hill in London; editing by Elizabeth Fullerton)

(chris.wills@reuters.com; 0044 (0)20 7542 5331; Reuters Messaging: chris.wills.reuters.com@reuters.net)) ($1=.5093 Pound)