The credit crunch claimed its first high-profile victim in the property sector yesterday when a proposed £4.5 billion pub joint venture between Mitchells & Butlers (M&B) and Robert Tchenguiz’s R20 vehicle was put on ice.

The delay to the deal, which was predicated on raising £4 billion of debt, undermines Mr Tchenguiz’s campaign to persuade J Sainsbury to spin off its property assets into a separate company. It could persuade him to abandon the attempt and back Delta Two’s £12 billion bid for the grocer.

However, in a sign that not all deals are being derailed by the debt market turbulence, London & Regional (L&R), the property group, is today expected to announce the completion of its acquisition of David Lloyd Leisure for £925 million.

One City source suggested that L&R had benefited from having its banker, Bank of Scotland, as an equity partner in the deal, while contracts had been exchanged in early June, before the start of the debt crisis.

Greene King, the brewer, also insisted last night that its plans to put about one third of its 2,200 pubs into a property joint venture were far from dead. Rooney Anand, chief executive, said he would “continue to look at it”, subject to favourable market conditions.

But in property circles, there are fears M&B’s setback could presage price-cutting on billions of pounds worth of single-building sales in a market already suffering jitters over investment values. Bankers said that HBOS’s mooted £1.2 billion approach to Quintain Estates and Development was looking increasingly shaky.

The M&B deal, which would have seen the Harvester and All Bar One operator return £1 billion to shareholders, was to have involved 1,300 of its 2,000 outlets and a rent level of £240 million. R20 would have bought a 50 per cent stake for about £250 million.

The talks, first revealed in May, had been largely concluded and the two sides were in final negotiations with Citigroup and Royal Bank of Scotland about the funding terms when the debt markets went into meltdown.

A source close to M&B said the resultant widening of the credit spreads – the margin over base rate imposed by the banks – would have reduced the amount of debt available by “a few hundred million pounds”, forcing the partners to inject more equity into the venture and reducing their returns.

Karim Naffah, the group’s finance director, surprised investors by revealing that M&B was sitting on a £60 million posttax loss after hedging against future interest rate and inflation levels. Some analysts questioned why he had hedged before signing off on the debt funding. Douglas Jack, at Panmure Gordon, said the “mess” M&B now found itself in “leaves the credibility of management in question”.

However, Mr Naffah claimed that the hedging had been taken out not only to insure against postdeal events, but also to remove some of the uncertainties that could have put the deal itself at risk. He said that the £60 million deficit was result of unexpected reductions in long-term interest rates.

M&B said that a joint venture was still “the most advantageous method of releasing substantial value from our property portfolio for shareholders” and that it hoped to revive a deal with R20 “subject to debt markets improving”.

Shares of M&B fell 35p to 713p.

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