The Asda-owning billionaire Issa brothers are attempting to beat supermarket rival Morrisons to buy convenience chain McColl's which has entered administration, putting more than 16,000 jobs at risk.
EG Group, whose brands include Cooplands, Euro Garages and LEON, are in talks to snap up the retailer which has appointed PwC as administrators "to protect creditors, preserve the future of the business and to protect the interests of employees".
In a statement issued to the London Stock Exchange, McColl's added it was "regrettably therefore left with no choice".
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Supermarket giant Morrisons, which is a major wholesale partner, had tabled a last-ditch effort to buy the business.
However, the company confirmed "the lenders made clear that they were not satisfied that such discussions would reach an outcome acceptable to them".
McColls said: "Further to the announcement on 3 May 2022, the company's senior lenders have this morning declined to further extend the waiver of the company's banking covenants, which has now expired.
"Whilst the constructive discussions with the company's key wholesale supplier to find a solution with them to the company's funding issues and create a stable platform going forward had made significant progress, the lenders made clear that they were not satisfied that such discussions would reach an outcome acceptable to them."
McColl's also said PwC intends to "implement a sale of the business to a third-party purchaser as soon as possible".
The retailer added: "Accordingly, the directors of the company and of each of Martin McColl Limited, Clark Retail Limited, Dillons Stores Limited, Smile Stores Limited, Charnwait Management Limited and Martin Retail Group Limited have resolved to file documents at Court today to appoint Mark James Tobias Banfield, Robert Nicholas Lewis and Rachael Maria Wilkinson of PwC as administrators of the company and of the named subsidiaries.
"That application is expected to be approved by the Court over the course of the day.
"The group has requested that the listing of its ordinary shares be suspended with immediate effect."
Earlier on Friday, Morrisons tabled a rescue deal which would also take on the business as a going concern, absorb its debts of over £100m and take responsibility for the company's pension scheme.
The two businesses are major partners, with McColl's operating hundreds of convenience shops under the Morrisons Daily brand.
McColl's has struggled financially in recent years after witnessing soaring costs due to supply chain disruption, inflation and its large debt burden.
On Thursday evening, McColl's had said it was in talks over "potential financing solutions" to resolve its funding issues.
Shares in McColl's were suspended earlier this week after the company delayed the publication of its latest financial results due to its financing talks.
A spokesperson for the trustee of the McColl's Pension Schemes warned staff could miss out on payments following administration and urged any new owner to protect the schemes.
The said: "The pension schemes are significant stakeholders in the company, and the trustees call on all potential bidders to make clear that they will respect the pension promises made to the 2,000 members by McColl's and its subsidiaries, and will not seek to break the link between the schemes and the company."
The trustees added: "Breaking the link between the schemes and the sponsor company, by way of a pre-pack administration, would represent a serious breach of the pension promises made to staff who have served the business loyally over many years, and risks causing the schemes to enter the Pension Protection Fund with a resulting reduction in benefits."
