THE £2 billion financial conglomerate Dawnay Day has this weekend become the latest victim of the credit crunch.

Administrators are expected to be appointed at some of its businesses tomorrow following talks with bankers and advisers.

The privately held company controls or has stakes in a sprawling portfolio of assets, including Austin Reed, the retail chain, the Lygon Arms in the Cotswolds, top London restaurant The Wolseley and a German department-store chain.

The two owners of Dawnay Day, Guy Naggar and Peter Klimt, have desperately tried to raise cash in recent days but are thought to have run out of time.

Ernst & Young (E&Y) is understood to have a team working at the group’s headquarters in London’s West End. This is being led by Alan Bloom, the veteran administrator who handled the collapse of Railtrack. E&Y declined to comment.

Dawnay Day carried out a £750m refinancing at the beginning of the year, taking out a mortgage with Norwich Union, but the scale of the group’s problems means it now needs additional capital.

Its troubles spilled out into the open at the end of last week when it was forced to sell a 20% stake in F&C Asset Management at a loss of more than £80m. The sale of the holding is understood to have resulted from a margin call from its financial backers.

Naggar, 67, and Klimt, 62, have set up scores of subsidiary operations and sources close to the situation are concerned the collapse could have a domino impact. Naggar is a director at 256 companies and Klimt of 283.

Subsidiaries include a number of property investment vehicles, some of which are listed on AIM. These specialise in buying property in countries including India, central and eastern Europe. Dawnay collects fees for managing the assets.

It also has a quoted hotel joint-venture company with Shore Capital. As well as the Lygon Arms, it has 19 other hotels such as the Carlton in Edinburgh, The Marine in Troon, The Majestic in Harrogate and The Imperial in Torquay. It also owns a 50% stake in The Wolseley, which was created by Jeremy King and Chris Corbin, the restaurateurs behind The Ivy.

For Klimt, the troubles faced at his firm could not come at a more difficult time. Since March he has been spending nearly all his time at the bedside of his son who has been in a coma following a traffic accident in the south of France.

Naggar and Klimt are big art collectors. Much of their collection is housed at the firm’s head office. Two months ago, Naggar and his wife Marion sold Lucian Freud’s painting Benefits Supervisor Sleeping at Christie’s for $33m (£16.5m).

Dawnay Day has been one of the most aggressive investors of the past six years and its appetite for expansion has shown little sign of receding.

It recently invested £127m in homes in Harlem, New York, as a step to building a US arm with property worth more than £5 billon. To achieve this, it created a company called Dawnay Day US Real Estate Management. According to the Sunday Times Rich List, Klimt and Naggar are each worth £235m.

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