Bent double, like old beggars under sacks, the shellshocked retailers stumble into the new year after the final, brutal days of 2008 delivered the coup de grâce for six large chains.

Conditions in the high street are at their worst in three decades. And as the liquidity crisis continues, the market remains alarmed at any company deemed to have excessive debt — think Debenhams, JJB Sports or, outside retailing, Premier Foods.

Any business burdened under a debt pile — like most of those in private-equity hands — is likely to find itself in deeper trouble this month. Thus the secretive private equity industry may find itself thrust back into the limelight.

Anthony Gent, an analyst at OC&C, the consultant, said: “Any retail business bought by private equity over the last two or three years will likely be highly leveraged and, given current trading trajectory, could be heading towards covenant breach,”

Usdaw, the shopworkers’ union, says that it is concerned that the private equity industry has failed to improve transparency, even after the Walker report recommended increased reporting by the industry.

Debenhams, among the biggest private-equity endeavours in Britain, has been struggling under its approximate £1 billion debt — a legacy of its 2006 flotation by CVC, Texas Pacific and Merrill Lynch Private Equity. Since then its share price has fallen 86 per cent as it has cut dividends and capital spending to reduce borrowings.

So will we see a return to the first half of 2007, when private equity was the unacceptable face of capitalism? In the days before investment bankers and short-selling spivs became the pantomime villains, unions and MPs lined up to attack the “asset-stripping locusts” of private equity.

The industry’s leading lights were hauled in front of the Commons Treasury Select Committee. They also faced protests from people in camel outfits.

The plight of the DIY and home improvements sector may provide a glimpse into the future, since it has proved attractive to private equity and has been mired in a downturn since 2007 because of the housing slump.

Merchant Equity Partners’ purchase of MFI ended in failure. Sun Capital owns HomeForm, the struggling owner of Möben and KitchensDirect, while Cerberus owns Focus DIY.

Both HomeForm and Focus were loss-making before the recession took hold, according to the most recent published accounts. Sun Capital, typically for the private equity industry, is reluctant to reveal financial details of HomeForm, such as its debt position.

Focus was sold last year for £1 by Apax and Duke Street Capital, its private equity owners. Peter Taylor, managing partner of Duke Street last year admitted to the Treasury Select Committee, that the company had too much debt. “With hindsight we left too much debt in that business. None of us could have foreseen the downturn in the DIY market.”

Is this an excuse we are going to be hearing more from private equity barons, as dwindling sales fail to cover debt refinancing or covenants?

Bill Grimsey, Focus’s chief executive, argues that the capital structure of the portfolio company is important. In contrast to the highly leveraged private equity model, Cerberus owns both the debt and the equity of the business. He said: “Private equity- owned businesses traditionally have high levels of debt. But Cerberus owns Focus lock stock and barrel. There isn’t an issue with servicing the debt.”

Few other private equity-owned companies enjoy being bankrolled by a parent company.

In the meantime, private-equity companies are being forced to sit tight, in the absence of any sales or acquisitions. The market conditions mean that, even if financing was available, a decent price would be impossible.

Private equity houses are, as a result, creating plenty of work for the executive search industry, The Times understands. With no hope of financial manoeuvring and no expertise on retail’s front line, they are left with one option: sack the chief executive.

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