CORRECTED - UPDATE 4-Virgin Team Picked for Northern Rock Rescue

By Steve Slater

LONDON (Reuters) - A consortium led by Richard Branson's Virgin Group expects to repay Northern Rock's NRK.L emergency loans from the Bank of England within three years, it said after being picked as the bank's preferred rescuer.

Virgin's proposal may calm a mounting political dispute about the use of taxpayer funds to help Northern Rock and also offers some potential upside to shareholders. Analysts said both factors probably helped it win support for its deal.

Northern Rock said the consortium would repay 11 billion pounds ($22.6 billion) immediately to the Bank of England if its bid was successful.

The full loan -- estimated at up to 25 billion pounds -- should be paid off in full in two or three years, according to the proposed head of the bank under Virgin's offer.

Jayne-Anne Gadhia, the chief executive of Virgin Money, said she is confident that Northern Rock's shareholders will support the Virgin consortium's offer, despite some investors calling for the auction to be scrapped.

"This is the best deal on the table as far as I can see, for shareholders and for the survival of Northern Rock going forwards as a business. I think shareholders will want to support it," Gadhia told Reuters in an interview.

Virgin's consortium, which includes buyout firm WL Ross, investment group Toscafund and Hong Kong-based investment group First Eastern, said under its plan 1.3 billion pounds of new cash will be injected into Northern Rock.

Half the cash will come from the consortium and half will be raised through a rights issue at 25 pence per share. The consortium will also inject Virgin Money, the Virgin financial services company, into the bank, with an implied valuation for Virgin Money of 250 million pounds.