West Midlands discount book retailer The Works, which collapsed into administration in January, has liabilities of nearly £80 million, with few creditors to get much back, The Birmingham Post can reveal.

But the troubled retailer could yet be saved. In a statement released to the company's creditors, specialist insolvency firm Kroll, acting as administrator for The Works, said it was in negotiations with a potential buyer and expects a sale next week.

It noted: "The statement of affairs indicates a significant shortfall to both secured and unsecured creditors. The dividend available to unsecured creditors will be very small."

Since taking charge, Kroll has shut 85 loss-making stores, including at the Pallasades in Birmingham, Stafford, Tamworth and Kidderminster, in a bid to make the business more attractive to a possible purchaser, resulting in job losses of up to 450 out of 1,600 staff.

Former owner Mike Crossley, who built the business with his wife Jane, said he was "surprised and shocked" at its plight.

The Works' liabilities total £79,529,000 against available assets of £6,600,000.

Its creditor list, which runs to over 700 names, includes book publisher Parragon Book Services, its largest creditor, which is owed £1,218,210.

Under Kroll's management, The Works continues to trade with a reduced number of stores and has launched discount promotions over 46,000 lines to clear stock.

The retailer cited challenging trading conditions due to increased competition as the primary reason for its downfall.

Problems with its marketing strategy and a store layout that alienated customers were further factors. It also suffered an over-reliance on Christmas trading.

An aggressive store expansion plan was abandoned in 2007 when a poor sales performance forced the company to focus on consolidating its existing operations.

Kroll's statement reveals that The Works, which has 317 stores nationwide, raised the alarm at the end of 2007 when it signalled that it would not be able to meet its lending covenants and its rent liabilities for the March quarter.

Negotiations with the bank proved unsuccessful after it became apparent that The Works would need to raise significant funding in excess of its current borrowing until 2010 and the company was left with no option but to call in the administrators in January.

The Works underwent an MBO backed by Hermes Private Equity Partners in 2005 which saw the private equity house take 79 per cent of the company's equity with the remainder being held by the six members of the management team.

The Works' demise is a further sign of deteriorating conditions for retailers as consumers curb their spending and comes on the heels of the collapse of another West Midlands firm, Dolcis, in January.

The beleaguered shoe firm was rescued by rival Stylo Group, owners of Barratt Shoes and PriceLess.

Recently plus-sized ladies clothing retailer Elvi, headquartered in Redditch with stores throughout the Midlands, also hit trouble and was sold to private investors after going into administration in February.

Kroll has clocked up more than £1 million in fees to handle The Works administration.

The statement of affairs says: "The joint administrators' time costs at March 16 are £1,386,199. This represents 5,260.9 hours at an average rate of £263 per hour."

The joint administrators are Peter Saville, Joanne Wright and Stuart Mackellar.