The chairman of House of Fraser said yesterday that the board was ready to buy out Baugur, the Icelandic investor that controls a third of the business, rather than allow the group to fall into the hands of any other retailer.

Don McCarthy said he was confident that the department store chain would retain its independence despite the turmoil in the Icelandic economy that has pushed Baugur to the brink of collapse.

Baugur owns a 35 per cent stake in House of Fraser after it backed a £350 million buyout of the business two years ago.

Sir Philip Green, the Topshop billionaire, and the private equity groups Alchemy and TPG have all been linked with bids for parts or all of Baugur's high street empire this week.

Mr McCarthy said that while there were question marks over Baugur's future, all other House of Fraser shareholders had first call on the Icelandic group's stock and therefore had no reason to sell out to any other bidder.

Mr McCarthy owns a 20 per cent stake while Sir Tom Hunter, the Scottish entrepreneur, has an 11.1 per cent holding. Mr McCarthy added that the vast majority of the group's debt was held with UK banks rather than Icelandic institutions.

Mr McCarthy said: “What a lot of people cannot get their head around is that Baugur is a minority shareholder. If I owned a third of Marks & Spencer and I went bust it wouldn't affect Marks & Spencer.

“If Baugur ever went into administration, if an administrator was ever appointed, it would take the shares and try to sell them in the marketplace.

“We have a pre-emptive right on those shares, so they are not going to go to someone else. We are not going to let anybody else in.”

He added: “There is a lot of uncertainty out there but honestly what we are focused on around here is delivering Christmas to the customer and making sure we are in sound shape for the end of the year.”

The comments came amid speculation that the meltdown in Iceland's economy was so acute that some importers could struggle to bring in food supplies over the next month or so.

Glitnir, one of the Icelandic banks that was nationalised by the country's authorities, yesterday was unable to pay a $750 million (£435 million) bond. Iceland's central bank added that its nationalised banks, which are major lenders to UK retailers, are finding it difficult to persuade British banks to do business with them, creating huge liquidity problems.

The Treasury has asked Ernst & Young, the administrator of Kaupthing, to stand by to step in as administrator of Landsbanki's UK assets this week.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts