New Star Asset Management is believed to be seeking to finalise a debt-for-equity swap with its bankers which could leave them substantially in control of the stricken fund manager.

The banks - HBOS, Royal Bank of Scotland, HSBC, Lloyds TSB and National Australia Bank - are owed £240m (€282.5m) as a result of New Star's 2007 decision to take on gearing to pay a special dividend to shareholders. Poor performance, plus a loss of clients, as a result of the credit crisis has left the manager struggling to service interest charges.