March 21, 2013 / 5:46 PM / 5 years ago

RBS to get up to 6 bids for Rainbow branches - sources

* Virgin Money submits proposal - sources

* Private equity firm JC Flowers makes offer - sources

* Investment firm led by ex-Tesco FD also interested

* Corsair, Anacap, Centerbridge are possible bidders

By Matt Scuffham

LONDON, March 21 (Reuters) - Royal Bank of Scotland is likely to receive up to six bid proposals for the 315 branches it has been ordered to sell ahead of a midnight deadline on Thursday, sources familiar with the sale process said.

Virgin Money and U.S. private equity firm J.C. Flowers, who have been seen as front runners to acquire the branches, have both submitted proposals, the sources said.

They are likely to face competition from several of Britain’s biggest investment firms, which are working on a joint proposal fronted by former Tesco finance director Andrew Higginson.

RBS was told to sell the branches by European regulators as a condition of receiving a 45.5-billion-pound bailout in 2008 that left it 82 percent state-owned. The sale process, dubbed Project Rainbow, suffered a setback in October when Santander pulled out of a deal to buy the branches for 1.65 billion pounds.

The Spanish bank found the prospect of separating and integrating the branches and their IT systems too onerous, but that does not appear to have discouraged interest from private equity players.

They are interested in UK retail banking assets because they like the simplicity of the businesses and see them as potential recovery plays once interest rates start to rise, a banking source told Reuters.

U.S. private equity firm Centerbridge Partners is interested in making an offer, sources have told Reuters. It could join forces with Corsair Capital, led by former Standard Chartered chairman Mervyn Davies, which has expressed an interest in the branches.

Santander had agreed to pay a premium to the book value of 1.3 billion pounds but RBS is now likely to receive much less. UK banks are typically trading at between 0.7 and 0.8 times their book value.

British private equity firm Anacap, the backer of new bank Aldermore, is also reported to be interested in the branches.

Nationwide had initially expressed an interest but is not putting forward a proposal despite RBS trying to tempt it back into the process, sources have said.

RBS is asking interested parties to come forward with bid proposals even though Chief Executive Stephen Hester said in February that a stock market flotation had emerged as the most likely option.

Hester said a share sale had emerged as the bank’s “baseline plan”, reviving the dormant Williams & Glyn’s brand which was disbanded in the 1980s.

The bank is pressing ahead with the plans for an initial public offering and will not change that unless it receives an outright bid which is attractive enough.

UBS is advising RBS on the sale.

RBS and UBS declined to comment.

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