The administrators of Waterford Wedgwood PLC have agreed an in-principle deal to sell the 250 year old china and crystal business to an American vulture fund.

The deal leaves Irish media tycoon Sir Anthony O’Reilly, who owns Independent News and Media, and his brother in law Peter Goulandris around E400 million (£360 million) out of pocket.

Deloitte, the adminstrator of Waterford Wedgwood, announced yesterday it had signed a “letter of intent” with specialist US distressed fund KPS Capital to sell the global business.

KPS, which once owned a German company, but currently invests only in North America, declined to comment on whether it would continue to employ any of Waterford Wedgwood’s 1,900 British employees who work at its factory in Barlaston, Stoke-on-Trent and its retail stores.

It is likely any new investor will outsource manufacturing at Waterford Wedgwood, which also makes the Royal Doulton brand, to Asia to save costs.

The Times has learnt KPS Capital has been in talks with Waterford Wedgwood’s board to buy the business for several months.

But time ran out and the iconic china company missed a January 2nd deadline to repay some of its E449 million debt mountain.

It is understood Waterford Wedgwood’s main lending bank, Bank of America, offered last weekend to give Sir Anthony and Waterford’s board another 16 days to complete the deal with KPS. However, other members of the banking syndicate, including hedge funds who had bought into the company’s debt, voted down the reprieve.

Sources close to Sir Anthony last night described yesterday’s deal as “bittersweet”, saying it was the best that could be expected for the company once it had gone into administration.

A source close to the administrator described his chances of recouping his equity investment - which was made through rights issues over the last five years - as merely “theoretical.”

Sources said it has yet to be decided how much KPS will ultimately pay for Waterford Wedgewood.

The company was financed through a combination of bank debt and a public bond and it is believed bondholders will not recover all their money. Aside from his equity investment Sir Anthony had also advanced Waterford Wedgwood several millions more eurosand could also lose that money.

Deloitte will continue to talk to other interested bidders untill the deal is finalised.

“In the interests of maximising returns to creditors, and in accordance with our duties, we will continue with our fast track M&A process in parallel.” said the accountancy firm.

Wedgwood — best known for its bone china — has become a byword for world standards in tableware design and manufacturing over more than two centuries.

But the company has had to fight through tough times since it was bought by Waterford Glass Group in 1986 as customers have moved away from formal dining.

Six years of losses forced the company to move all its major ceramics production to the industrial outskirts of Jakarta, the capital of Indonesia.

The company had already announced last month only a small number of its high-end products — handpainted figurines and the iconic blueand-white china — would continue to be made in England. Waterford Crystal — an Irish glassware brand whose chandeliers hang in Windsor Castle and Westminster Abbey — has also suffered dramatically.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive