Northern Rock to have govt loan extended

LONDON (Reuters) - Stricken bank Northern Rock could have its 25 billion pound Bank of England lifeline extended indefinitely, The Sunday Telegraph has reported.

European Union guidelines currently block the bank from receiving state aid beyond February 17, but the newspaper said on Sunday that advisers to Chancellor Alistair Darling had bowed to pressure from the firm and were working on a plan to change the status of the funding to 'restructuring aid'.

This would allow the Bank of England to continue funding Northern Rock indefinitely -- a move that could be crucial to any proposed takeover of the company.

Northern Rock was forced to go to the Bank for emergency loans two months ago, as the global squeeze on credit markets caused its funding strategy to collapse.

An auction of the company has since been launched, while Chief Executive Adam Applegarth resigned on Friday.

The group is widely reported to have received several takeover proposals on Friday, while others are expected to come in early this week.

One of the bids has come in from entrepreneur Richard Bransons's Virgin group, while another has been lodged by former Abbey National Chief Executive Luqman Arnold.

The Sunday Telegraph named Dutch bank ING and US private equity firms JC Flowers and Apollo as further interested parties. It added that the Northern Rock board would meet to discuss the proposals on Sunday.

A spokesman for Northern Rock declined to comment.