Virgin Group’s preferred-bidder status for Northern Rock will come under pressure today as JC Flowers begins a series of meetings with the beleaguered bank’s board.

The American private equity group is hoping to gain preferred bidder status alongside or instead of Sir Richard Branson’s company after submitting a revised proposal at the end of last week.

The news came amid reports last night that the Treasury and Bank of England were drawing up emergency plans to repay savers’ deposits in the event that a suitable is not found or if the troubled bank should go into administration or be nationalised.

It is understood that Northern Rock and Adam Applegarth, its chief executive, received JC Flowers’s fresh proposal on Friday, as well as a second revised proposal from Cerberus, another American investment firm.

Although JC Flowers’s offer has been sanctioned as an “approved bid” by the Treasury, it is understood that the bank’s board believes that it has not seen anything in the new offer that would make it change its allegiance. A source close to Northern Rock said: “They haven’t seen anything yet to make them change their position . . . they still think that Virgin is the preferred option.”

However, a source close to JC Flowers said that the American firm was to flesh out details of its proposals at a series of meetings with Northern Rock, its advisers and Treasury officials, starting today. He said: “The objective over the next few days is to get on the same accelerated programme alongside or ahead of Virgin and we think we can meet the same timetable.”

JC Flowers’s new proposal includes a concession in which the Bank of England’s outstanding debt would be treated on a par with the debt that it is borrowing from a string of commercial banks, as opposed to ranking below them. It has also agreed to keep Northern Rock as a listed company on the London Stock Exchange and provide some form of participation to allow shareholders to benefit from any improvement that the bank may enjoy under its ownership.

JC Flowers, which is run by Christopher Flowers, the former Goldman Sachs banker, threatened on Friday to walk away from the process unless the Treasury agreed to talk to it about its proposal.

It has said already that it would pay £15 billion upfront to the Bank of England, with the remaining £14 billion or so being settled by 2010 at the latest.

Virgin, by contrast, whose bid is headed by Jayne-Anne Gadhia, has said that it would pay down £11 billion immediately and clear the rest by a similar deadline.

Sources close to the Treasury confirmed last night that JC Flowers’s proposal had met its criteria that taxpayers would be protected and receive all the money lent to Northern Rock, plus interest, as quickly as possible. The news that JC Flowers is stepping up the pressure comes amid growing concerns about the debt financing for Virgin’s bid. Deutsche Bank denied reports at the weekend that it was close to pulling out of a consortium of banks that had agreed to lend £15 billion to Sir Richard. Nevertheless, the bank’s shares closed down 8 per cent at 109p a share as investors bet that the takeover could fall through.

Sources close to the group, which also includes Citigroup and Royal Bank of Scotland, said last night that progress was being made. The three banks were locked in meetings with the Treasury and the Bank of England about how to carve up the Rock’s assets as collateral.

Bryan Sanderson, Northern Rock’s chairman, is understood to want to recommend a bid for the bank within the next couple of weeks, before the Christmas holiday and ahead of a shareholder vote, which would be scheduled for early January.

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