24 hours to rescue the High St

The retail tycoon Sir Philip Green was finessing his bid to grab up to 10 per cent of the UK retail market by purchasing the debt of Baugur, the beleaguered Icelandic investor.

Last night, the billionaire Sir Philip told The independent that he was still "waiting to hear back" from the Icelandic government on his offer to buy more than £1bn of Baugur's debt in a deal that could ultimately transform the ownership dynamics of the UK high street.

Sir Philip said: "We are looking at the entire debt of the Baugur group, [which] encompasses a whole basket of things." Baugur owns or has stakes in more than 20 retailers, from the toy specialist Hamleys to fashion retailer Karen Millen, and employs 53,000 people in UK retail.

Sir Philip owns the Arcadia Group, which is comprised Bhs, Topshop, Topman, Burton, Miss Selfridge, Wallis, Evans and Dorothy Perkins.

A decision within 24 hours by the Icelandic government is understood to be critical to the survival of Baugur Group, which faces the possibility of administration if the deal collapses, although the operating retail businesses would be unaffected for the time being.

On Sunday, Baugur's founder and chairman Jon Asgeir Johannesson said its investments could hit the buffers "one after the other" unless it completes a rescue deal with Sir Philip.

Sir Philip is effectively attempting to gain control of some the retailers controlled by Baugur by buying the debt at hugely discounted prices. Once he has the debt he will be in a position to call in the loans. Sir Philip said: "Unless the company can repay the debt we will have the equity."

The market research firm Caci has calculated, based on estimated average sales at the UK's top 100 shopping centres, that Sir Philip could eventually control 10 per cent of the centres' sales through his existing Arcadia Group stores and those which Baugur controls. Those estimates include Baugur's stakes in listed retailers including Moss Bros, French Connection, Woolworths and Debenhams, but not sales of Iceland, the frozen food retailer in which Baugur is a shareholder. However, yesterday Sir Philip said he was not yet looking at Baugur's listed investments.

Even when Baugur's stakes in listed UK retailers are not included, Sir Philip's combined Bhs, Arcadia Group and Baugur-controlled businesses would give him about 7 per cent of the high street's sales.

Paul Langston, Caci's associate director for location strategy, said that Baugur's fashion chains, which include Karen Millen, Oasis and Coast, are classed as middle to upper market and complement Sir Philip's mass-market retailers. "There will inevitably be some crossover but the Baugur group is a little bit more upmarket and they sit quite neatly together."

He added: "it is a very good opportunity for him. it shows that, in the credit crunch, if you have the money there are opportunities."

If Sir Philip was to ultimately get control of Baugur's retailers, a potential 10 per cent share of the UK market would make his retail empire second only to Tesco, which accounts for more than 14 per cent, or £1 in every £7 that is spent in the UK.

Asked why he was interested in expanding his retail business despite the poor economy, Sir Philip said: "We are here because we are an operator."

He added: "We run the business. We are here for the long term." Was that, then, the problem of the banks – that they are short-term, and not "operators"? Sir Philip said: "There was a lot of money available and not many operators [entrepreneurs]. That was how it was. When you are the operator you are involved in the day to day business – you are the creator, the inventor.""

Asked about if he was interested in non-fashion retailers in Baugur's portfolio, Sir Philip said he would look at them "on a company-by-company basis". The potential that an expanded retail empire including Topshop, Hamleys and House of Fraser would have to change the high street are huge.

However, Mr Langston said: "We cannot risk losing such a big number [of retailers] as a result of the Baugur problems. While it may not be ideal having that much power in the hands of one group, that is a better option that losing a large number of shops on a struggling high street."

Speculation has linked Sir Philip's proposed deal with Baugur to a potential Office of Fair Trading inquiry on competition grounds, if the OFT deemed it to constitute a merger situation. However, Sir Philip yesterday lambasted the rumours by "people who cannot afford to buy it". He said: "There is not going to be an OFT inquiry."

It should be stressed that even if he buys Baugur's debt, Sir Philip – without a substantial conversion of debt to equity – will not run Baugur's retail portfolio, although he is likely to have substantial influence. For the time being, the Baugur controlled retailers will continue to be run as separate operating businesses by the existing management.

Yesterday, Sir Philip said: "I don't think anything will happen to the underlying [operating] businesses [if a deal is not completed in the short-term]."

This view was supported by Don McCarthy, the chairman of House of Fraser, yesterday. in a statement, Mr McCarthy said: "I felt that it was again important to clarify the independence of House of Fraser from these issues and to emphasise that they have no impact on the strength of its business, its operations or its trading performance."

He added: "There is no doubt that Baugur is facing a difficult period, as they have been unwillingly drawn into the Icelandic banking crisis and the unfortunate political repercussions between the Icelandic and UK Governments."

Executives at Baugur are concerned that the spiralling speculation concerning the Icelandic investor is having a damaging impact on the morale at retailers controlled by the Icelandic investor.

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