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Shares in Woolworths were suspended this morning as the company attempted to conclude talks to sell its 840-store retail business.

In a statement, Woolworths confirmed that it was in talks to sell its 40 per cent stake in 2 entertain and at the same time said was still locked in talks to sell its retail division.

Woolworths' shares have been suspended at 1.22p, after falling 8.96 per cent yesterday, valuing the company at just £17.8 million - 95.3 per cent less than its £385 million debt mountain.

The Times revealed last week that Hilco, the distressed investment fund, is offering to buy the retail arm, as well as assume a large chunk of Woolworths' debt, for just £1. It has reached a side deal to sell its 40 per cent stake in 2 entertain, its profitable DVD business, to BBC Worldwide, its joint venture partner. But the sale of the DVD business hinges on talks over the rest of the business.

The company said today that both deals are subject to approval from its lending banks, led by GMAC and Burdale, and it is understood Woolworths is meeting with its lenders today.

However, the 99-year old company's future is uncertain and sources last night said administration was the most likely option as the retailer scrabbles to find sufficient funds to pay the monthly wage bill for its 30,000-strong staff.

Steve Johnson, Woolworths chief executive, fears that he and the rest of its board will be forced to put Woolworths into administration themselves to avoid breaking the law by trading while insolvent and is trying to juggle its cash position to allow it to meet its payroll obligations on Friday.

It is understood that the retailer’s finances are balanced on a knife edge as its till receipts have fallen and its suppliers have refused to trade with it.

Hilco, which has been in exclusive talks with Woolworths for weeks, wants to take over its retail arm as soon as possible to maximise revenue from Christmas trading.

If Hilco succeeds with a bid, it is tipped to put the retail business into a pre-packaged administration immediately, allowing it to shed some liabilities.

Mr Johnson is refusing to meet Woolworths’ largest shareholder, Ardeshir Naghshineh, an Iranian property magnate with a 10 per cent stake. Sources say that Mr Naghshineh has been told that its exclusivity pact with Hilco precludes talks with a rival bidder.

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