Jessops backers lose out in debt-for-equity deal

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Executive chairman David Adams said the deal was the only practical way to ensure any kind of future for Jessops' 2000 employees in the run-up to the key Christmas selling season.

But ordinary shareholders will be left with just £100,000 to share between them after ownership of the operating company is transferred across to the bank, Jessops' pension fund and an employee trust.

HSBC is writing off £34 million of debt in return for its share stake.

Jessops shares slumped 40% to just 1¼p. The firm, which opened its first store in 1935, was floated by the private equity arm of ABN Amro just five years ago at 155p a share.

But after a disastrous Christmas in 2006 and failure to latch onto digital photography quickly enough, Jessops plunged into losses and its debts soared to more than £60 million.

Today it said that if the HSBC deal did not go through tomorrow it would be forced into insolvency.

Meanwhile, ordinary shareholders can expect to receive around 0.1p for each share when the quoted company is finally wound up.

Adams added: "This restructuring proposal will ensure that Jessops Group Ltd remains a fundamentally strong business with a strong presence on the High Street."