Creditors of Zavvi have parachuted an emergency restructuring team from Ernst & Young into the struggling high street retailer, which previously traded as Virgin Megastores.

Deloitte, which is the administrator of EUK, the distribution arm of Woolworths and Zavvi’s biggest creditor, has drafted E&Y into the CD and DVD retailer as the fallout from the collapse of Woolworths widens, The Times has learnt. Zavvi’s management team, which bought the 125-store business from Sir Richard Branson’s Virgin Group last year, has approved the appointment of E&Y.

However, it is understood that E&Y is also standing by to step in as administrator of Zavvi if the retailer cannot repay its £106 million of debt to EUK, a move that would threaten the jobs of 2,500 staff. Zavvi has been unable to stock its stores since EUK went into administration last week. The music and games distributor stopped its deliveries amid the chaos of the Woolworths collapse, although it is believed to be servicing some customers.

Last night Zavvi was indicating on its website that it could not take online orders. “We are currently experiencing supply problems and have temporarily suspended orders until the supply situation is resolved,” the message read.

Virgin Group, which backed the management buyout of Zavvi, could be liable for millions of pounds if the retailer goes under because it has guaranteed Zavvi’s orders with EUK. Virgin has underwritten about 60 days of credit for Zavvi, which ends next month. Sir Richard sold Virgin Megastores to Simon Douglas, the Zavvi chief executive, for £1.

Zavvi is one of a number of big customers that owe money to EUK. It is understood that Tesco and J Sainsbury also owe the collapsed distributor about £25 million each. Zavvi’s precarious situation will compound the blood-bath on the high street.

Yesterday Deloitte began a consultation process with Woolworths’ 30,000 staff. The accountancy firm conceded on Wednesday that it had failed to find a buyer for the whole group, making it increasingly likely that nearly all of the retailer’s workers will be made redundant on Boxing Day. Deloitte has promised to pay everyone until Christmas Day; however, it said that it may have to close some stores before then. Virgin and Ernst & Young declined to comment. Zavvi could not be reached for comment.

As Woolworths staged a further half-off sale on merchandise, more than 800 people signed a petition to the Prime Minister asking him to save the chain, which has traded on the British high street for 99 years. The petition asked signatories to “tell the Government to intervene and save this British institution and help save its 820 stores and 30,000 staff”.

Woolworths is almost certain to be broken up and its stores sold off piecemeal to rival retailers, such as Tesco, Waitrose and Poundland.

The sale at Woolworths, the latest big round of discounting in the retail sector, will concentrate on Christmas essentials, such as food, drink, toys and gifts, in a scramble for trade before the holidays.

Harrods has followed suit with unprecedented preChristmas sales. Tesco started its own sale yesterday, cutting prices on 1,000 lines by up to 50 per cent.

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