Lloyds Banking Group was chasing debts and investments of more than £700 million last night after the collapse of a property developer that it has been bankrolling.

Administrators at Grant Thornton were appointed to salvage what they could of Kenmore Property Group, a £1.8 billion collection of funds and companies in which John Kennedy, once said to be one of Scotland’s wealthiest men, is the main shareholder. Debts owed by Kenmore are part of the estimated £70 billion commercial property loanbook that Lloyds, which is 43 per cent-owned by the taxpayer, inherited from HBOS when it took over the bank last year.

HBOS is understood to have pumped at least £700 million in loans and equity investments into Kenmore and its funds, leaving it nursing potentially huge losses after falls of 45 per cent in commercial property values. The bank declined to comment last night.

Peter Cummings, former commercial loans chief at HBOS, is said to have been close to Mr Kennedy, 58, the founder of Kenmore, which was battered by the collapse of Lehman Brothers, an investor in three of its eight funds. One of Mr Cummings’s last moves before being ousted from HBOS last December was to approve a further rescue payment of £67 million to keep Kenmore afloat.

Lloyds continued that emergency funding yesterday, providing new money to allow the administrators to keep running the business, which is based in Edinburgh, as a going concern and avoid a firesale of assets.

The collapse is a dramatic reversal for Mr Kennedy, the son of an Ayrshire farmer. According to The Sunday Times Rich List, his swashbuckling property deals propelled him to a £105 million fortune by 2008, enabling him to own a private jet, a yacht and a retreat in the Pentland Hills. Mr Cummings is said to have been a major cheerleader for Mr Kennedy, providing several injections of finance since 2001 into both the group and its funds. Mr Kennedy once likened tapping the banks to “discovering the overdrive switch on a 15-year-old car”. Mr Cummings, once hailed as a banker with the golden touch, is now blamed for flushing away billions of pounds of the bank’s money into property-backed ventures that later failed.

Separately, the Financial Services Authority is investigating whether HBOS misled investors in the prospectuses for its two capital-raisings last year, in particular over information about impairments in the corporate loan book. The scale of the write-offs in the corporate book emerged only after Lloyds took over the business.

Kenmore assets in the 21 companies now in the hands of Grant Thornton are mostly office blocks and industrial properties in towns including Leeds, Manchester, Middlesbrough and Plymouth. Kenmore has a further £1.5 billion committed to schemes in the Gulf, but many of its development projects have been mothballed.

Grant Thornton has been appointed receiver for two other funds and is administrator for Kenmore Private Equity, a company set up in 2007 to invest in caravan parks, renewable energy and sportswear. Other Kenmore funds are not in administration. These include the Kenmore European Industrial Fund (KEIF), an independently run listed vehicle.

Mr Kennedy was last night still on the board at KEIF, although his position is understood to be in jeopardy.

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