The future of Arnotts remains unclear after it emerged that the iconic Irish department store could be sold for a little as €1 as part of plans to restructure its debts.

According to the Irish Independent newspaper, Anglo Irish Bank and Ulster Bank - the banks to which Arnotts owes about €250m (£208m) - agreed earlier this year that they could buy out all the shares in the iconic store for a nominal sum.

The strategy would cancel out the shareholdings of chairman Richard Nesbitt and his family as well as investment vehicle Boundary Capital. In 2006, Anglo Irish Bank teamed up with Boundary Capital to make a joint €65m (£54m) investment in the business for a 45% stake.

According to the newspaper, there had been no changes to the shareholding as it went to press yesterday.

If the nominal payment is made, the banks could rebuild the company and sell it on to an international trade buyer to claw back their debts.

However, it was revealed yesterday that the banks had applied to the European Union to take over the ailing department store. The deadline for any objections to be lodged is August 9.

Arnotts owes state-owned bank Anglo Irish Bank over €150m (£125m), while Ulster Bank holds the remainder of the company’s debt.

It is thought that the banks, which parachuted in specialists including former Brown Thomas chief executive Nigel Blow, have instructed the store to concentrate on retailing, not property development, after an ill-fated decision to back the €750m (£625m) development of the Northern Quarter was mothballed.

Arnotts has been told by the banks that the plans may now have to be abandoned, even though officially it is due to go ahead in 2011.