Edinburgh Woollen Mills, owner of the Peacocks and Jaeger clothing brands, says it plans to appoint administrators in a bid to save the business.
The move puts 24,000 jobs at risk amid what the company described as “brutal” trading conditions.
“Like every retailer, we have found the past seven months extremely difficult,” said Edinburgh Woollen Mills chief executive Steve Simpson.
The stores will continue to trade as a review of the business is carried out.
The retail group and a trade organisation which represents some of its Bangladesh-based suppliers locked horns after the organisation alleged that the firm had £27 million in unpaid debts to businesses which are members of the organisation.
EWM chairman John Herring is understood to have said in a letter that advanced negotiations with a prominent US investor overtaking a stake in Peacocks had been threatened.
EWM Group owner Philip Day brought in advisers to size up its Peacocks chain last month, following an unsolicited approach.
Discussions are ongoing over the possibility of selling a minority shareholding of the brand to a US investment firm.
Last week, Herring sent a letter to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) chair Rubana Huq, writing that the allegations are now jeopardising the company and its 24,000 employees.
The letter is understood to have added that “one of our companies, Peacocks, has been in advanced negotiations with a prominent US investor and your conduct now threatens the completion of these negotiations”.
Following Herring’s call for an investigation into how the figure of the unpaid bills was released to the media, Huq responded to a previous letter from Herring to clarify that EWM Group has paid its suppliers “to a considerable extent” and that the amount owed is less than what was originally circulated.
However, she insisted there were still “unpaid bills”.
EWM Group released a statement last month saying it has paid off all its bills, and has also previously said it does not recognise the £27 million figure.
Nevertheless, a source close to the matter told Retail Gazette that BGMEA admitted that the original £27 million figure that was recirculated was false and the company has paid its suppliers to a “considerable extent”.
Herring is understood to have said in a follow-up letter that “the lack of knowledge and contempt to the facts demonstrated in your reply is completely unacceptable for a trade organisation representing hundreds of thousands of workers and the largest industry contributor to GDP in Bangladesh”.
He went on to say that the false statements from the President of the BGMEA amounted to “effective sabotage” of the business.
This follows news that the EWM Group is mulling legal action against the BGMEA for recirculating false figures around levels of outstanding debt.
Although Huq maintained that there were still outstanding payments, she was not able to say what those outstanding amounts.
The Group has urged the BGMEA President to now come out with a clear statement that the original figure that was recirculated was completely false, saying “it is imperative you provide us with a copy of the exact statement you have provided to the press without further delay, so that we can correct false understandings”.