According to a newspaper report, Sir Richard Branson's Virgin Group is in the process of making an improved offer for the ailing Northern Rock bank.

The news came before today's announcement by Chancellor Alistair Darling that billions of pounds of taxpayer's money loaned to Northern Rock will be turned into bonds.

The announcement should make it easier for a private company to rescue Northern Rock.

According to a Sunday Times report, Virgin is prepared to cut its proposed stake in Northern Rock from 54 per cent to 45 per cent. If this were the case then it would allow existing shareholders a greater share in a possible recovery in Northern Rock stock.

Sir Richard Branson described Virgin's bid as a winnable package on Saturday, reports the BBC.

Sir Richard Branson has been accompanying the Prime Minister Gordon Brown on his tour in Asia. Brown denied rumours that he and Branson had made a deal.

Speaking in India he said, I can reassure people entirely that any negotiations about Northern Rock will be taking place in London. If a number of commercial companies are expressing interest in the future of Northern Rock then its right that the government explore all options available to us, reports the BBC.

In addition to Virgin's bid, Olivant group led by Luqman Arnold has also put forward a proposal for Northern Rock.