Value retailer Ethel Austin is on the verge of winning a rescue refinancing deal.

Former MK One boss Elaine Gray is behind the approach, according to reports.

Speculation that Ethel Austin has been hit by tough trading has been rife over recent months. Last year, it exchanged debt for almost all of its equity after a poor performance in 2006 and debts were written down to £20 million from £57 million.

It is understood that Gray provisionally agreed a deal on Friday with a consortium of investors including the company’s investors Credit Suisse, Eos Partners and ABN Amro.

Gray is believed to be paying a discount price for Ethel Austin’s £25 million debt.