Retail entrepreneur Kevin Stanford has been forced by a court in Iceland to repay a £1.3m personal guarantee he gave to secure finance for his investment portfolio.

The 2005 loan of 4.2bn Icelandic krona (£39m) was advanced by Icelandic bank Kaupthing, which collapsed over two years ago. The loan had been due to be repaid in November 2008. The funds went to investment company Materia Invest, 33% owned by Stanford, who also owns around 60% of high street fashion chain All Saints.

As security for the loan Kaupthing had demanded personal guarantees each from Stanford and his two Materia Invest co-owners, Thorsteinn Jonsson and Magnus Armann. All three were close business associates of Baugur tycoon Jon Asgeir Johannesson, according to reports.

In November, Stanford was reportedly forced to pay out £2.5m of his own money after personally guaranteeing a bank loan to his former premium womenswear business Ghost, which fell into administration in 2008.

Stanford also has a stakes in department store House of Fraser. It is unclear how the loan repayment will affect his retail investments.