Talks involving a syndicate of lenders were said to have gone on into the night after the retailer confirmed on Wednesday it was in talks over a possible offer, fuelling speculation its 800-store retail chain could be sold to Hilco, the restructuring specialist, for a nominal £1.

It was reported the syndicate of lenders, led by Bank of Ireland subsidiary Burdale Financial and GMAC Commercial, were holding out on the deal. However, executives close to the negotiations said they were hopeful there was still a chance of an agreement. But they warned that both the deal and Woolworths were now "teetering on the brink of collapse", according to the report.

Hilco would take on about £250m worth of Woolworths' debt as well as the stores business as part of the deal, the report said. A retail deal would leave Woolworths with EUK, its entertainment wholesale division, and 2Entertain, the music and video publishing venture with the BBC.

Woolworths, one of the UK's best known chains, has been a presence on UK high streets for nearly 100 years but has been battered by competition from supermarkets and internet retailers. It reported half-year losses of almost £100m in September, as it warned its retail arm faced "operational issues and strategic challenges". Former Focus DIY boss Steve Johnson, who joined the company as chief executive this summer, is undertaking a strategic review. The company reported a net debt position of £295m in August.

Hilco is well known in UK retail circles after acquiring fashion chain MK One this year and subsequently placing it into administration.