UPDATE 2-ITV leadership search hits new hurdle
* Michael Bishop, Crispin Davis ruled out for chairman role
* COO Cresswell to leave ITV once new CEO found
* Cresswell to be interim CEO while search goes on
* ITV says searching for chairman with "all due speed"
* ITV shares up 2 percent, Goldman upgrades
(Adds analyst reaction, shares)
LONDON, Oct 12 (Reuters) - ITV (ITV.L) said two contenders to succeed Michael Grade as chairman of Britain's biggest free-to-air commercial broadcaster had ruled themselves out, dealing a fresh blow to its long search for new leadership. ITV also said on Monday that chief operating officer John Cresswell had to be interim chief executive but planned to leave the company once a permanent CEO had been found.
ITV, facing the worst advertising downturn for decades, has been searching for a new chief executive since May when Grade, then executive chairman, announced he would step back from the day-to-day running of the company.
Its search for a chairman, who will select the next chief executive, began in September when Grade agreed to leave the company altogether after it failed to secure former BSkyB (BSY.L) boss Tony Ball as chief executive.
ITV, which had said as recently as Sept. 25 that the search for a new chairman was "well advanced", said both former Channel 4 and BMI British Midland chairman Michael Bishop and former Reed Elsevier chief Crispin Davis had ruled themselves out as candidates for the position of chairman.
"The (nominations) committee has revised its shortlist accordingly and is continuing its search with all due speed," ITV said in a statement.
Cresswell, who had been seen as a contender for the post of of chief executive, would leave to "seek a fresh challenge", ITV said.
Analyst Patrick Yau at Canaccord Adams said Bishop ruling himself out of the running was significant.
"With so many potential candidates stepping back from the job or refusing the job, we wonder what the big issue is at the heart of ITV," he said.
ITV's shares were 2 percent higher at 47.3 pence by 1131 GMT, as a Goldman Sachs upgrade to "neutral" from "sell" outweighed the latest leadership setback at the "Coronation Street" and "X Factor" broadcaster.
The bank said in a note that progress on the group's CEO and Contract Rights Renewal had been as positive as hoped, but Q3/Q4 TV advertising data was modestly ahead of forecasts and ITV was attractively valued against its European peers.
"We have modestly upgraded our 3Q/4Q advertising forecasts and are 9 pct/29 pct ahead of Reuters consensus EPS in 2009/10E," they said in a review of the European broadcasting sector.
(editing by John Stonestreet)