The United Arab Emirates is at risk of total wipeout on a £600m loan it provided to the Barclay family as part of its doomed bid for control of The Telegraph.
The Gulf petrostate's media arm, International Media Investments (IMI), helped the Barclay family pay off £1.2bn in overdue borrowing from Lloyds Banking Group with a new loan in 2023.
The £600m debt was secured against Very Group, the online retailer built on the back of the Littlewoods catalogue. IMI provided the loan alongside a separate but linked £600m loan from the private equity fund RedBird IMI, secured against The Telegraph and The Spectator magazine as part of a plan to take control.
Very, which specialises in financing consumer purchases from fridges to trainers, is being prepared for sale as part of the collapse of the Barclay family empire. Estimated prices mean IMI is at risk of receiving no repayment, according to three City sources.
The formal process has not yet begun and the valuation could change, but it is understood that investment bankers have priced Very at between £1.2bn and £2bn. At the lower end of the range, insiders believe that IMI would be wiped out.
At the upper end, it is possible the UAE would be repaid in full. It is also unclear what security IMI took over other Barclay family properties to guard against Very's challenges.
The proceeds of a sale at the low end of the range would be consumed by Very's borrowing from the US investor Carlyle.
The Barclay family, who remain legal owners but have effectively lost control, would only see any proceeds at the top end of the range.
Sources emphasised that the sale was in the early stages, with bankers at Morgan Stanley and Barclays lined up to oversee an auction but yet to be appointed. The formal sale process is expected to begin in spring.
The package, brokered by the former Cabinet minister Nadhim Zahawi, was intended to hand control of The Telegraph to RedBird IMI. The manoeuvre was blocked, however, by legislation outlawing foreign state ownership of newspapers.
The deal has sparked a diplomatic and political crisis. The former Conservative leader Sir Iain Duncan Smith has claimed the Government has failed to intervene to force an onward sale of The Telegraph because "they don't want to upset the UAE".
Speaking at the World Economic Forum in Davos, Switzerland on Thursday, the Business Secretary Jonathan Reynolds said: "I can tell you there's no specific agenda in relation to The Telegraph specifically.
"We are a country that welcomes foreign investment. I think it's a little bit different when it comes to parts of the media, and that's why the consultation DCMS is doing reflects part of that. But it's not any sort of specific agenda from the Government in that regard."