Robert Tchenguiz is facing close to a billion pounds of losses after much of his investment empire collapsed with the Icelandic banking system.

The billionaire British property entrepreneur has become the latest high-profile casualty of the banking crisis after his lender took control of his stakes in J Sainsbury and Mitchells & Butlers (M&B), as the Icelandic Government moved to push through huge sale of its banks’ overseas assets.

Mr Tchenguiz is one of several billionaires who borrowed heavily from Kaupthing, the troubled Icelandic bank, to buy public equities. When borrowers could not meet margin calls on the loans, the bank seized them for sale to protect its own position amid the market turmoil.

A number of British-based Russian oligarchs linked to Icelandic banks are also understood to have had their holdings seized. Russia, which began talks this week to give the Icelandic Government a €4 billion (£3.2 billion) bailout, has strong economic ties to the island nation.

Mr Tchenguiz faces potential losses of well in excess of £700 million from his two big public equity investments, which were made at the height of the bull market last year. One banker said: “It’s got to be all over for Robbie as an investor, hasn’t it?”

However, a friend of the entrepreneur told The Times: “It’s three or four years’ work down the drain, but I can guarantee Robbie will be back. The thing to remember is he’s wealthier now than six years ago.”

Kaupthing forced through the sale of a 22 per cent stake in M&B, the pub operator, to Joe Lewis, the Bahamas-based billionaire, and put Mr Tchenguiz’s 10 per cent stake in J Sainsbury up for sale. The holding in Sainsbury’s is available at 250p a share, a big discount to Mr Tchenguiz’s estimated purchase price of 450p-500p a share. Sainsbury’s shares fell 47p to close at 267p yesterday. Sources said that about a third of the stake was sold in the market before Kaupthing’s trading desk was closed for business yesterday mid-afternoon. Until the desk is reopened by Kaupthing’s administrators, the sale will remain in limbo.

Mr Lewis, a tax exile who has investments in Ladbrokes and in Tottenham Hotspur Football Club, declared the purchase of a 21.8 per cent holding in M&B, but was thought to be close to buying further shares last night, taking his holding to 25 per cent.

Sources said that the bank was also liquidating the remaining 4.7 per cent that Mr Tchenguiz holds in M&B through contracts for difference.

The sale to Mr Lewis, who lost more than £500 million on a gamble on Bear Stearns, the failed American bank, was struck at 130p a share, against an average purchase price estimated at 500p. That would equate to a loss on his investment of about £390 million.

Mr Lewis is believed to be one of a number of billionaires, thought to include Sir Philip Green, the retail magnate, who are ready to snap up bargains from the wreckage of companies backed by Icelandic banks.

Mr Tchenguiz and his brother Vincent own British property worth billions of pounds through a family trust, but Kaupthing’s sale will come as a big blow because it took place at the bottom of the market. Despite the extensive losses, Mr Tchenguiz is understood to remain solvent, albeit with a much reduced personal fortune.

Friends pointed out that he had pocketed huge profits from a number of investments before the collapse of the markets, selling holdings in businesses including Whyte & Mackay, the distiller, and Pubmaster, the tenanted pub company. He also made money last year from the sale of stakes in Shell Mex House and Sampo, the Finnish insurer, and in July he made a profit from the sale of Somerfield, the supermarket chain.

Mr Tchenguiz had recently borrowed money from Kaupthing to finance the conversion of much of his holding in M&B from derivatives to ordinary shares. The bank retained the shares as collateral and called in the loan as part of its efforts to shore up its precarious position.

The sale of the stake in M&B brings to an end Mr Tchenguiz’s attempts to use his holding to unlock value from the pub operator’s underlying assets. Focus has inevitably turned to his other links to Kaupthing, which has

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts