Sir Philip Green flies to Reykjavik to negotiate a deal with Government ministers to buy the retail group’s debt.
Baugur founder Jón Ásgeir Jóhannesson has admitted that he will lose control of the group, whose portfolio includes House of Fraser, Iceland, Wyevale Garden Centres and Karen Millen, if a deal with Sir Philip goes ahead.

The UK entrepreneur has made a bid to buy Baugur's debt, held by troubled Icelandic banks, which has been estimated at around £2bn. Sir Philip is reported to be bidding at significant discount rates, estimated between 60% and 70%.

Mr Jóhannesson said in an interview at the weekend that a deal with Sir Philip, even at "fire sale prices", would be the right thing for both the government and Baugur's employees in order that the British stores don't "fall one after the other".

In a statement this morning, House of Fraser chairman Don McCarthy re-iterated the department store chain's independence from Iceland's economic woes. He said: I felt that it was again important to clarify the independence of House of Fraser from these issues and to emphasise that they have no imact on the strength of its business, its operations or its trading performance."

Financial services company Credit Suisse said of the deal: "We would imagine that the debt he is reported to be bidding to buy at a significant discount relates to the operations actually owned and operated by Baugur. Within this group we expect he is only going to be interested in the clothing related companies."

Credit Suisse has reservations as to whether department store House of Fraser and the Wyevale Garden Centre chain will be of interest to Sir Philip. It also doubts the Topshop boss will have plans for minority stakes in companies such as Debenhams and Woolworths, and believes the Baugur interests in these businesses "to be liquidated through the market in due course".

The company concluded by stating that Sir Philip "is acting opportunistically in a way that gives him a fast return on highly discounted assets".