Dec. 12 (Bloomberg) -- Northern Rock Plc, the U.K. bank bailed out by the Bank of England, fell 7.1 percent in London trading after the Times reported Cerberus Capital Management LP has dropped out of the running to buy the bank.

The shares fell 7.4 pence to 97 pence by 8:28 a.m., valuing the bank at 408 million pounds ($833 million). A spokesperson for Cerberus, a New-York-based buyout firm, declined to comment and Northern Rock wasn't immediately available for comment.

Billionaire Richard Branson's Virgin Group Ltd. is the bidder preferred by Northern Rock's board and advisers, though shareholders favor an offer from Olivant, led by former Abbey National Plc Chief Executive Officer Luqman Arnold, the newspaper said. Northern Rock has borrowed about 25 billion pounds in emergency funding from the central bank after rising short-term credit costs made it unable to get funding.

The U.K.'s Financial Services Authority would like the government and the bank to investigate as quickly as possible ``the two proposals that are on the table,'' to see if either would work as a preference to the government nationalizing the bank, FSA Chairman Callum McCarthy said at a meeting with lawmakers yesterday. McCarthy declined to identify the proposals.

To contact the reporters on this story: Jon Menon in London jmenon1@bloomberg.netBen Livesey in London blivesey@bloomberg.net.

Last Updated: December 12, 2007 03:33 EST