Lloyds Banking Group has been forced to swallow a £600m debt-for-equity swap at Admiral Taverns, the pubs group, in the latest fallout from the banking group’s ill-fated merger last year with rival HBOS.

The deal, which could come this week in the form of a pre-pack administration, will force Lloyds to take control of Admiral, one of Britain’s largest pub groups, after it fell behind on repayment of more than £1 billion in debts.

It is the latest in a line of British pub groups that has collapsed during the recession and comes just weeks after the Globe Pub Company was put into administration. It has since been bought by brewer Heineken.

Admiral, which controls a portfolio of more than 3,000 pubs, grew rapidly on the back of a £850m loan from HBOS but it has proved to be a disastrous business deal. Lloyds is now expected to wipe out between £400m and £600m of the company’s debts, as well as write off a £120m loss on interest-rate swaps.

In total, Lloyds’ exposure to the company amounts to just less than £1 billion, though the bank has already provisioned for the loss in its half-yearly results, when it announced an £8 billion bad debt charge.

It is a further blow to Lloyds, coming just days after it was revealed that the company could lose about £700m through its exposure to Kenmore Property Group, which fell into administration last week. Kenmore is a £1.8 billion collection of funds owned by John Kennedy, once believed to be Scotland’s wealthiest man.

Admiral was founded in 2004 and was built up by the Landesberg and Rosenberg families. The pubs sector has been badly hit by the recession, which has compounded problems it was already facing — the smoking ban, rising beer duty and cut-price competition from supermarkets.

The downturn has also forced Regent Inns, owner of the Jongleurs comedy-club chain, as well as Orchid Group to go through pre-pack administrations to survive.

Premium Bars & Restaurants, owner of the trendy Living Room chain, is also in talks to be rescued.

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