THE management of Woolworths was locked in crisis talks this weekend about securing a revised rescue deal to save the group from imminent collapse into administration.

Hilco, the restructuring company which is seeking to buy Woolworths’ 840 high street shops for £1, sweetened its offer to the chain’s bank lenders late on Friday night by offering to assume a greater share of the retailer’s £385m debt mountain.

Woolworths’ lenders – a syndicate led by GMAC and Bank of Ireland subsidiary Burdale – last week rejected an offer from Hilco to buy the shops for £1 and assume about £265m of the group’s debts.

Under that plan the publishing and distribution businesses – which make about £40m profit before tax and interest – would have remained within the Woolworths group along with about £120m of debt. The group’s pension fund, which is in deficit, would also have remained within the group.

The Sunday Times has learnt that Hilco tabled another last-ditch offer this weekend to take on up to £300m of the group’s debts – leaving the lenders with just £85m.

The final amount could be smaller because it is believed that Woolworths has not yet drawn down all of its existing £385m credit facility.

It is thought that revised terms were still being drafted on Saturday afternoon between Hilco and Woolworths’ lenders, but a positive outcome was by no means certain. The talks are being led by Woolworths chief executive Steve Johnson and Paul McGowan, chief executive of Hilco.

Unless a deal is agreed in the next few days the entire Woolworths group looks poised to collapse into administration – putting 30,000 jobs at risk.

If Hilco succeeds in its rescue plan it would keep a core of about 250 Woolworths stores and sell off the rest to supermarket chains or high-street rivals.

It is thought that even if Hilco agrees a deal it may still initiate a so-called “prepack administration” for the stores arm which would make it easier for it to shed onerous leases and reemerge with a smaller sustainable retail chain.

Woolworths’ biggest shareholder, Norwich-based property tycoon Ardeshir Naghshineh, who controls a 10.2% stake, is still fighting to keep Woolworths independent.

The Sunday Times understands that he is due to meet Woolworths’ management team and bank lenders tomorrow to go over the details of an alternative business plan, which involves raising £150m from disposing of 200 store leases and revamping the remaining chain to take it upmarket.

Naghshineh will argue that up to 150,000 jobs are indirectly under threat from the collapse of Woolies because other retailers depend on the chain for their supplies.

EUK, Woolworths’ distribution business, is the sole supplier to Zavvi, the music retailer. It refused to comment this weekend on how it might be affected by the collapse of Woolworths.

Baugur, the Icelandic investment group, which owns about 10% of the shares, is also furious about the company’s predicament.

It is understood that an alternative takeover approach was made early last week by at least one private-equity firm but no firm offer has emerged and no discussions are currently taking place.

City sources say that Woolworths is fast running out of cash amid torrid trading conditions on the high street.

It is thought that the company only has sufficient funds to last until about the middle of next month.

If a deal cannot be agreed before then, the Woolworths management team would be legally obliged to put the company into administration rather than risk breaking the law and trading while insolvent.

The board had been due to agreea new business plan for 2009 with its lenders by December 23, but that now looks impossible.

Shares in the retailer have plunged by more than 90% in the past 12 months, to close at 1.43p on Friday, valuing the equity of the group at just £20.86m.

The group is attempting to negotiate a rescue deal at the worst possible time when the economy is in turmoil.

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