JC Flowers is threatening to drop its bid plans for Northern Rock within days unless the Treasury agrees to hold talks about its proposals for the stricken mortgage bank.

The American buyout group has been trying all week to contact Treasury officials but has so far been snubbed, according to sources, who said that Flowers had "plenty of other things to do".

"We expect to hear something. Effectively we want to move into an accelerated process alongside or instead of Virgin. We are in a position to reach agreement prior to Christmas with the required co-operation," one source said.

He revealed that under revised proposals JC Flowers is prepared to retain Northern Rock's stock market listing in order to allow shareholders to benefit from any recovery.

Sources had previously said the American firm's proposal had not been a favourite because of plans to take Northern Rock private via a pre-packaged bankruptcy that left shareholders with nothing.

The Treasury, Bank of England and regulators at the Financial Services Authority are working with Northern Rock chairman Bryan Sanderson on a sale of the crisis-hit Tyneside lender, which has been in freefall since being forced to seek emergency loans from the Bank in mid-September.

Rock shares have rallied in recent days amid stake building by hedge funds SRM Global and RAB Capital, which are determined to ensure that shareholders are not wiped out by any rescue bid.

The embattled lender owes the Bank almost £30 billion, it emerged yesterday, up from £25 billion the previous week.

The Treasury, along with the Bank and the Financial Services Authority, have named Sir Richard Branson's Virgin Group as a preferred, but not exclusive bidder.

Rivals have accused the Treasury of refusing to co-operate with potential counter-bidders. However, the Treasury said it was prepared to examine any proposal that met its criteria.

“We stand ready to have discussions with any bidder that meets the principles that we have set out,” a spokesman said.

It is understood the Treasury rejects suggestions that it is hampering rivals' chances of tabling formal bids for the bank. It believes it to be in its own interests to have a competitive auction.

One source close to Northern Rock today said the bank was spending "overwhelmingly more time with Virgin than with anyone else" but he stressed that conversations with the other bidders were ongoing and that none of them had been disqualified.

"We don't want to discount alternatives so we continue to have a data room open, we continue to have meetings with other people. We haven't got Virgin done yet, it isn't over till it's over."

Virgin has enlisted Citigroup, Royal Bank of Scotland and Deutsche Bank to provide it with £15 billion of liquidity but one source close to the banks said they were still a long way off from signing on the dotted line.

"It's absolutely possible for it to fall over," the source warned, adding that the funding from the three banks, if agreed, would be available equally to any successful bidder, not just Virgin.

The banks plan to spend the next several weeks in detailed discussions with the Tripartite Authorities to try and reach agreement on how to divide up the Rock's assets to provide all parties with enough collateral for their loans.

Even if Northern Rock is acquired, the sources said it will continue to rely on the Bank of England, as well as the commercial lenders, for several months to come.

Sources said Virgin had been selected as the preferred bidder principally because it planned to return £11 billion immediately to the Bank of England and because it wanted to keep Northern Rock as a listed entity. But sources close to JC Flowers said it was prepared to pay £15 billion. Under both proposals, the remaing Bank of England debt would rank alongside other creditors.

Virgin's plans to inject £1.3 billion of equity into the Rock, including a capital raising of £650 million from a share sale to existing shareholders. JC Flowers' equity injection, at £1 billion, is slightly less but does not require shareholders to stump up any additional cash.

A source close to JC Flowers said: "We are prepared to offer some form of continued participation for shareholders, which would allow them to benefit from Flowers' track record in turnaround situations."

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