The women's footwear retailer Faith was in advanced negotiations with two bidders over a management buyout to safeguard the future of the chain yesterday.
Sources said that the private equity firms Endless and Epic are interested in backing the MBO at Faith, which has 78 stores and 120 concessions.
FEC Holdings, the parent company behind Faith and Chilli Pepper, the group's wholesale fashion unit, has debts of £14m. This sum is owed to Barclays Bank, the investment fund Agilo, and the management team led by John Kinnaird.
Management at Faith remain hopeful of completing a sale as a going concern over the weekend. Yesterday, Mr Kinnaird, Faith's chief executive, told The Independent: "We are absolutely committed to finding a new partner to buy the business back."
The accountancy firm Grant Thornton is running the sale process and Clearwater Corporate Finance is advising Faith on the right private equity firm to choose.
If a sale is not achieved, one scenario is for existing shareholders to remain as backers of the business. The management own more than 60 per cent of Faith. However, sources close to the company vehemently denied that if a sale is not agreed an administration was on the cards.
Faith, under the leadership of Mr Kinnaird, returned to profit in the year to January 2010, delivering earnings before interest, tax, depreciation and amortisation totalling £1.5m.
This followed a loss of £5.5m the previous year which included eight months under the former owner. Barclays, Epic, Endless, Clearwater, Agilo and Grant Thornton declined to comment yesterday.
The Leeds-based private equity firm Endless has turned around The Works since backing a deal that bought the discount bookseller out of administration in 2008.
Epic, which controls the retailer Past Times, previously backed the now defunct shoe chain Dolcis, but exited its investment in January 2008 before it collapsed.
Epic acquired the coffee and tea specialist Whittard of Chelsea out of administration at the end of the same year.
Mr Kinnaird, the former chief executive of Dolcis, and Agilo bought Faith out of administration for an undisclosed sum in September 2008. The private equity firm Bridgepoint bought Faith for £64m in 2004, but the retailer lost its way and eventually collapsed under the weight of its debts in 2008.
Since buying Faith, Mr Kinnaird has initiated a raft of changes as its chief executive.
He has trimmed costs by reshaping its portfolio of shops, relocating its head office to a business park in west London and moving its warehouse operation from the South East to Northampton. He has also set up a new website and plans to introduce a small range of men's footwear.
Mr Kinnaird believes there is an opportunity for Faith to prosper in the sector's middle market.