Under the plan by parent company Ossian Retail, now controlled by London investor Agilo, Internacionale and Au Naturale are to be broken up following a cashflow crisis at its 120 outlets.

Ossian had also been abandoned by its former bankers, and its £25m debt was sold off to Agilo.

Ossian's problems are now widely regarded as another sign of stress in the UK retail sector and the global credit crunch, although mismanagement has also been blamed.

Agilo did not return calls for comment. However, its website describes the company as a "London-based fund that invests in distressed companies and special situations" andMr Portillo is listed as one of five members on the group's "advisory panel".

David Brock, Ossian's nonexecutive chairman, last night told The Herald: "I can confirm that Internacionale has been sold, but I'm afraid I'm not at liberty to say to whom. I can tell you this deal has saved almost 1000 jobs, and I'm very pleased about that."

Mr Brock said of Au Naturale: "I'm afraid it is most likely going to end up in administration."