MFI, the kitchen retailer, will fall into administration tomorrow unless talks to secure financial backing for a management buyout are successful.

Chief executive Gary Favell was understood to be in “advanced discussions” this weekend about securing funds for a buyout, but Kroll, the firm of restructuring experts, is on standby if the deal falters.

A number of potential financial backers are said to be talking to management. They include millionaire entrepreneur Brian Kennedy, founder of Everest double glazing, and the private-equity group Rutland Partners.

A resolution must be found before tomorrow morning when the kitchen and home-furnishing chain’s quarterly rent is due. This weekend observers believed the management would agree a buyout deal. A person close to the meeting said that the talks were very “fluid and fast-moving”.

The retailer has some 200 stores and is understood to employ 3,100 staff.

MFI was bought by Merchant Private Equity (MEP), which is run by former investment banker Henry Jackson, for a nominal £1 two years ago.

MEP partners include John von Spreckelsen, former chairman of Somerfield, and David Hamid, the former chief executive of Halfords, who is also chairman of MFI.

With the financial support of Goldman Sachs and turn-round retail specialist Hilco, MEP invested £200m in the kitchen chain.

However, the downturn in the consumer market has made the last year extremely challenging.

MFI considered merging with its British rival Homeform - which owns Moben Kitchens - or Magnet, but talks came to nothing.

Argyll Partners was appointed recently to find investors who could pump money into the business.

MFI has been among those hit hardest by the fallout from the credit crunch as consumers cut back on big-ticket items such as kitchens.

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