* Barclay family repays 1.2 billion pound debt to regain control
* Abu Dhabi backed deal and is due to become new owner of titles
* But UK blocks transfer pending review of impact on press freedom
(Adds political opposition to deal in paragraphs 13-15, financial impact on Lloyds in paragraphs 17-18)
LONDON, Dec 4 (Reuters) - The Barclay family regained control of Britain's influential Telegraph newspaper on Monday after Abu Dhabi-backed RedBird IMI helped repay its 1.2 billion pound ($1.5 billion) debt to Lloyds Bank.
However, a proposed transfer of the newspaper to RedBird IMI has been thrown into doubt after the British government last week officially intervened to block the move while it investigates whether any takeover would have an impact on freedom of expression under the new owner.
A battle to own the right-leaning newspaper and the Spectator political magazine was launched earlier this year when Lloyds seized control of the titles following a long running dispute over the debt.
Determined to regain control of two titles read closely by the governing Conservative Party, the Barclays teamed up with RedBird IMI to pay off the debt, and were given a deadline of Monday to hand over the money before a court hearing would enable an auction to proceed.
Under the plan, RedBird IMI was due to quickly gain control of the assets through a debt-for-equity swap, until the government stepped in.
Lloyds confirmed in a statement that it had received the funds.
"We are always keen to work constructively with customers who get into difficulty with their repayments to reach an amicable solution," a spokesperson said. "We'd like to thank all parties for their role in reaching this point."
Twin brothers David and Frederick Barclay bought the newspaper in 2004, adding to their interests in media, retail and property. David died in 2021, and his son now manages his former assets, according to reports.
RedBird IMI is led by former CNN executive Jeff Zucker and is backed by Mansour bin Zayed Al Nahyan, a member of the ruling family of Abu Dhabi, capital of the United Arab Emirates (UAE).
A spokesperson for RedBird IMI declined to comment on Monday.
It said last week it believed that editorial independence for the titles was "essential to protecting their reputation and credibility".
Media Secretary Lucy Frazer has asked competition and media regulators to examine the deal and report back by Jan. 26.
"With the UAE's increasingly influential position as a mediator and power-broker, the risk for interference in Britain's national conversation seems self-evident if the acquisition is allowed to go ahead," a group of lawmakers told the government last week.
A senior editor at the Telegraph said she was confident the government would block the deal.
"We can trust that they will come up with the right conclusions because it is obvious to all of us that a newspaper owned by a Gulf state will face questions surrounding freedom of expression," Camilla Tominey wrote in the newspaper on Friday.
The planned auction had attracted interest from potential buyers including Daily Mail owner DMGT, Belgium publisher Mediahuis, and hedge fund founder Paul Marshall and Czech billionaire Daniel Kretinsky.
However, as the newspaper had only been expected to fetch up to 600 million pounds, KBW banking analyst Ed Firth said the repayment looked like a "great outcome" for Lloyds, and it should mean a higher payout for shareholders in February.
Lloyds is expected to write back more than 500 million pounds on the value of the loans, which had been subject to a series of writedowns over the years, a source familiar with the matter said. ($1 = 0.7900 pounds) (Reporting by Paul Sandle, additional reporting by Alistair Smout and Iain Withers; Editing by Kate Holton, Kirsten Donovan)