The proposed takeover of J Sainsbury could be in doubt after it emerged that the three banks funding Delta Two’s £10.6 billion offer have been forced to go back to their credit committees to extend their financing agreements.

It is understood that Credit Suisse, Dresdner Kleinwort and ABN Amro are considering whether to extend the financing agreements for another six weeks as talks between the parties drag on.

The banks agreed to underwrite the financing before the credit market turmoil set in, and so it is possible that one or more could now judge it too risky to recommit itself to a deal of this size. In recent weeks, dozens of private equity-led takeovers have been put on hold as banks refuse to provide financing until they clear their backlog of other committed, but as yet unsyndicated, deals.

In an unusual move in the Sainsbury’s case, the three banks agreed to underwrite the deal before the company opened its books. It is believed they did so to appease the Qatari royal family, which owns Delta Two and does not want anything to jeopardise the chances of the deal going through.

Delta Two, however, may be forced to pump in more equity and cut its borrowings to keep any bid alive.

It is thought that the three banks want to extend the financing agreements, but higher interest payments may make any deal more expensive. Sources have said the Sainsbury’s deal was not deemed as risky as some private equity-style transactions because a large portion of the debt would be secured against its property portfolio.

Even property-related deals have been delayed because of the market turbulence and investors’ unwillingness to back any leveraged deal.

The news comes amid increasing tension between the banks, Delta Two, Sainsbury’s board and the supermarket chain’s founding family, which owns 18 per cent of its stock. The sides have been locked in talks since July 18, when Delta Two approached Sainsbury’s with an offer of 600p a share.

The Qataris own 25 per cent of the group and want Sainsbury’s board to open its books for due diligence. But the Sainsbury family is unwilling to back a bid that leaves the group too indebted. It is also pushing for a higher price and for the Qataris to meet demands of Sainsbury’s pension trustees.

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