UK discount retailer Poundland is rushing to keep suppliers onside after credit insurers halted their cover of the chain, The Telegraph has reported.

The paper said that a management delegation flew to Shanghai earlier this month to meet with Chinese factory owners and persuade them to maintain production for the retailer, while similar talks were held with UK partners last week.

The Shanghai meetings reportedly came after insurers stopped offering new cover to certain suppliers to Poundland, which would expose them to losses if it failed to pay. The hesitance to write new policies comes after the discounter’s owner Gordon Brothers hired advisors for a potential auction of the brand in August, just over a year after buying it for £1 and overseeing a major restructuring.

Sky News reported in late August that Modella Capital, owner of TJ Jones, Hobbycraft and Flying Tiger Copenhagen, is among those bidding to take the retailer over.

The potential for a quickfire sale of Poundland has raised fears over its future, according to The Telegraph.

It may destabilise the current plan to get the business back on track, which has cost Gordon Brothers around £60 million and resulted in the closure of 149 stores and the axing of 2,200 staff in January.

One industry source told the paper: “They have created a load of turbulence that Poundland now has to manage its way through.”

The auction is believed by the paper to be overseen by Alvarez’s restructuring department, whose expertise includes handling high-profile insolvencies. This has fuelled suspicion that Gordon Brothers may be planning to place the company into administration and make a quick profit by offloading the remainder of its stock, according to the Telegraph.

Suppliers would be classed as unsecured creditors in the case of insolvency, leaving them facing major losses without insurance.

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