Cerberus drops out of race for N. Rock: report

LONDON (Reuters) - U.S. private equity firm Cerberus has dropped out of the race for beleaguered British mortgage bank Northern Rock NRK.L, the Times newspaper reported.

The paper, quoting sources close to the bank, said on Wednesday that the only two bids being considered seriously by the Northern Rock board and its advisers were the proposal from Virgin Group and a rival approach from Olivant, an investment group headed by the former boss of British bank Abbey.

Britain's government, which has sanctioned 25 billion pounds of Bank of England loans for Northern Rock since it became the country's biggest casualty of the credit crunch, has picked Richard Branson's Virgin as its preferred bidder.

Buyout firm J.C. Flowers withdrew from the auction last week.

(Reporting by Clara Ferreira-Marques; Editing by David Cowell)