Robert Tchenguiz, the property billionaire, saw his stakes in J Sainsbury and Mitchells & Butlers (M&B) liquidated this morning as the Icelandic Government pushed through a massive sell-off of its banks’ assets.

The entrepreneur now faces huge losses from his two big public equity investments, which were made before the markets collapsed last year.

Mr Tchenguiz’s bank, Kaupthing, which is now operating under the partial control of the Icelandic Government, today put his 10 per cent stake in J Sainsbury up for sale.

The shares have been placed at 250p a share, a huge discount to Mr Tchenguiz’s purchase price of more than 450p a share. Sainsbury's shares fell to 279.5p on the news but later recovered slightly.

Sources said that the bank is also liquidating the remaining 4.7 per cent that Mr Tchenguiz holds in M&B through contracts for difference.

Times Online revealed this morning that Mr Tchenguiz had managed to sell a 25 per cent stake in M&B for £137m to Joe Lewis, the British billionaire who lost more than £500 million on a gamble on the failed US bank Bear Stearns.

The billionaire has close links to John Magnier and JP McManus, the racing entrepreneurs, whose Elpida vehicle holds about 10 per cent of M&B.

Mr Tchenguiz and his brother Vincent also own British property worth billions of pounds through a family trust, but Kaupthing’s sale will come as a big blow because it took place at the bottom of the market.

Despite the extensive losses, Mr Tchenguiz is understood to remain solvent, albeit with a much reduced personal fortune.

Mr Tchenguiz had recently borrowed money from the bank to finance the conversion of much of his holding in M&B from derivatives to ordinary shares. Kaupthing retained the shares as collateral and called in the loan as part of its efforts to shore up its precarious position.

The forced sale at 130p a share will hurt Mr Tchenguiz as he is understood to have paid an average of about 500p a share. That would equate to a loss on his investment of about £390 million.

The sale of the stake in M&B brings to an end Mr Tchenguiz's attempts to use his holding to unlock value from M&B's underlying assets.

He had recently reached a peace agreement with the company that saw two of his lieutenants at his R20 investment vehicle join the M&B board. Tim Smalley and Aaron Brown are expected to step down once the stake sale is confirmed.

Focus has inevitably turned to his other links to Kaupthing, which has backed several of his past deals with debt and equity.

The Icelandic bank has debt and equity in the Bay Restaurant Group, which runs the Slug and Lettuce and La Tasca chains, and Town & City Pub Company, which operates about 160 high street bars, most branded as Yates's.

J Sainsbury, which reported its first-half results today, cautioned that it expects the "challenging" environment to continue into the second half of the year.

Sainsbury's, the UK's third largest supermarket group, this morning posted second quarter like-for-like sales up 4.3 per cent at the top end of analysts' expectations. However, its shares fell in early trading as investors anticipated the sale of Mr Tchenguiz's stake and in reaction to the group's outlook.

Justin King, chief executive of Sainsbury's, said: “The economic environment remains particularly challenging and we expect this to continue throughout the second half, but we have developed the Sainsbury's offer to perform in these conditions.”

Mr King admitted today that the banking crisis has “significantly constrained” the retail sector and said that food inflation had gathered pace in the second quarter.

But he added that the supermarket's customers were increasingly turning to its own brand products to save money, and said its "basics" range had grown by 30 per cent in the 16 weeks to October 4.

Like-for-like growth in sales continued from the first quarter and revenue over the first half grew by 3.9 per cent, excluding fuel. Total sales for the second quarter were up by 8.4 per cent.

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