Creditors meet for last-ditch talks to save Woolworths

Major shareholder tables plan to pull retailer back from the brink of collapse

Urgent talks are taking place today to rescue Woolworths from collapse. The beleaguered high street firm's biggest shareholder will tomorrow table a last-ditch rescue plan to banks that are considering pulling the plug on the 99-year-old company.

Ardeshir Naghshineh, a property entrepreneur with a 10 per cent holding in Woolworths, will today meet the chief executive, Steve Johnson, before proposing the plan to creditors. Mr Naghshineh hopes to stave off the sale of Woolworths' 820 stores and other assets to Hilco, the restructuring group, for a nominal £1.

Retail experts warned that the chain's collapse, with the possible loss of tens of thousands of jobs, would be a serious blow to consumer confidence in the run-up to Christmas. The British Retail Consortium yesterday warned that its members already face one of the worst Christmases in memory.

Sources close to the deal warned that it was last chance to save the shops: "If it fails because of the banks then we'll see 30,000 job losses at Woolworths and the knock-on effects could see as many as 150,000 out of a job."

Woolworths is a major supplier to WH Smith and Zavvi, the former Virgin Megastore chain, and the loss of supplies in the month of Christmas trading could prove catastrophic.

One City source said: "The Government is happy to bail out banks with our cash but they are prepared to see Woolies go to the wall with the prospect of thousands of job losses. This is a crazy and avoidable situation."

Mr Naghshineh's plan includes the disposal of key leases to rival retailers that would yield around £150m and the sale of Woolworths' stake in 2Entertainment, a DVD publisher, to the BBC for as much as £200m. Woolworths is also believed to be sitting on stock worth more than £500m. It also owns EUK a wholesale distributor. The banks will be asked to relax their lending covenants and build in incentive clauses for creditors based on a revival in the retailer's fortunes.

Mr Naghshineh believes the plan would ascribe a 60p-per-share value on the company – trading in Woolies closed at 1.43p a share on Friday.

The Hilco deal, backed by the Woolworths board but opposed by major creditors, will see the group take on £265m of Woolies' £385m debt, leaving the profitable rump of the company, 2Entertainment and EUK, with £120m remaining debt guaranteed by the banks.

"The offer from Hilco is a joke and blatantly undervalues the company," said Mr Naghshineh: "Richard North [the chairman] shouldn't have gone down this route. We think that with the right plan in place this business can be saved and ultimately prosper."