Poundworld has called in administrators, putting 5,100 jobs at risk.
The budget retailer is poised to appoint Deloitte to handle an administration after last-ditch rescue talks with R Capital broke down over the weekend.
It has shops in Brighton and Crawley.
Poundworld, which is owned by TPG Capital, has around 350 stores.
Its possible collapse comes after both Toys R Us and Maplin fell into administration earlier this year.
It is understood that TPG and Poundworld's management rejected offers to buy the business out of a pre-pack administration, and were hoping to sell it as a solvent business.
Other parties named as possible buyers were turnaround specialist Alteri Investors and Poundworld's founder Chris Edwards.
But a deal could not be struck.
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