The new owner of Homebase will unveil plans to close about a quarter of its stores next week, threatening more than 1,000 jobs.
Sky News has learnt that Hilco Capital, which struck a deal to buy the DIY chain for a nominal sum in May, is expected to outline proposals for a Company Voluntary Arrangement (CVA) that will pave the way for roughly 60 of Homebase's 249 outlets to be axed.
Sources said the CVA – a controversial insolvency mechanism which has been deployed by retailers including Carpetright, Mothercare and New Look this year – would be launched by Alvarez & Marsal, the professional services firm, early next week.
The closure plan will come amid further evidence of the deteriorating outlook for British high streets, with House of Fraser desperately battling to secure new funding to avert a collapse that would threaten 17,500 jobs.
Hilco, which rescued HMV five years ago, has been working on the CVA since buying Homebase from Wesfarmers, the Australian group which paid £340m for it in one of the most disastrous takeovers ever seen in the British retail sector.
The number of stores to be axed was still being finalised on Wednesday, with a range of 50 to 80 shops thought to include 18 which have already been closed in recent months.
If it is at the top end of that range, the closure programme will represent almost one third of Homebase's estate.
The precise number of jobs that will be lost was also unclear, with analysts speculating that it was likely to be between 1,000 and 1,500, roughly 10% of Homebase's 11,000-strong workforce.
The eventual figure could be higher, according to one insider.
Wesfarmers began approaching potential buyers of the DIY chain earlier this year, just two years after completing its takeover.
Homebase was intended to be a launchpad from which the Australian retailer would take on B&Q in a battle for supremacy in the DIY market.
However, Wesfarmers' strategy backfired spectacularly in the last 18 months, forcing it to write off more than £500m after it ditched some of Homebase's most popular business lines.
Sales in the three months to the end of March fell 13.5% to £211m, according to figures published last month that Wesfarmers blamed partly on the "Beast from the East" weather front which brought inclement conditions to the UK for an extended period earlier this year.
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While Homebase's travails are largely self-inflicted, they have compounded the sense of gloom engulfing Britain's retail sector as online competition and rising high street costs squeeze many established chains.
Homebase declined to comment, while A&M and Hilco could not be reached.
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