Ex-Abbey boss swoops on ailing Northern Rock: papers

LONDON (Reuters) - Luqman Arnold, the former head of British banking group Abbey, has assembled a team and is emerging as a potential bidder for Britain's troubled mortgage bank Northern Rock NRK.L, British Sunday newspapers said.

Arnold is proposing a deal which does not involve a sale or break-up of the Newcastle-based bank and details of his proposal are expected to be finalized ahead of this Friday's deadline for bids to be submitted, the Sunday Times said.

The proposal is thought to involve acquiring an equity stake of between 10 and 20 percent and Arnold becoming interim chief executive to replace Adam Applegarth, who would leave the company, the paper added.

The Sunday Telegraph said Arnold has held informal talks with Northern Rock's chairman, Bryan Sanderson but Arnold's request for exclusivity in bidding for the bank was denied.

Some five years ago Arnold was brought in to rescue Abbey, Britain's fifth largest bank, after problems with its wholesale banking arm. The bank was later sold to Spanish bank Santander.

Among potential bidders for Northern Rock are Richard Branson's Virgin Group-led VA.UL consortium and U.S. buyout firm JC Flowers which have both confirmed their interest. Cerberus, another Wall Street powerhouse, is also interested, sources familiar with the situation have said.

No one at Northern Rock was immediately available for comment.

(Reporting by David Jones; Editing by Greg Mahlich)