Ailing UK department store chain Allders has filed filed for bankruptcy protection, appointing risk consultancy firm Kroll as administrator.

In a statement released through Kroll, the company said it had fallen victim to tough trading conditions and the failure to find a buyer.

The administrators said the group would trade as normal while they reviewed all options for the business. Staff would be paid as normal during the review, they added.

But the move is sure to threaten the jobs of the 7,000 staff employed by the group and will fuel fears over whether the company will be able to honour commitments to its pension fund, which is believed to carry a deficit of around £16 million.

It also is likely to deal a blow to a number of companies that supply Allders or have concessions in its stores such as clothing retailers Alexon and Jacques Vert.

Property group Minerva, which owns 60 per cent of Allders' holding firm Scarlett Retail, has been searching for a buyer since it put the company up for sale in December.

It is thought that a number of rival retailers, including Debenhams and House of Fraser, have expressed an interest in buying individual stores.

Media reports at the weekend suggested Harvey Lipsith, who was chief executive of Allders until 2003, was preparing a bid.

But the sales process was disrupted last week by news that brokers Lehman Brothers had sold its debt to Hilco, a City-based retail restructuring specialist that has previously turned around the Ciro Citterio menswear chain before selling it on.

Richard Ratner, an analyst at Seymour Pierce, said the situation at Allders was "very messy", but believed that administrators had a duty to sell the business as a going concern rather than break it up and dispose of individual branches.

Although the pensions deficit was believed to be around £16 million, Mr Ratner said this could rise as high as £75 million if it was wound up.

Scarlett Retail, a consortium comprising Minerva, Lehman Brothers and its senior managers, bought Allders two years ago for £158 million.

But it has found the challenge of reviving the business more difficult than expected and Minerva told investors that its share of Scarlett Retail had brought losses of £22.6 million last year.

Allders operates 26 department stores and 19 stand alone homeware stores.

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