Poundland owner Gordon Brothers has been warned it could face government intervention due to mounting concerns over the chain’s future, and claims that a rescue bid was rejected.

Business Secretary Jonathan Reynolds said ministers were urgently seeking answers from the US investment firm over its handling of Poundland, which has around 600 stores and employs 12,000 people.

The government is reportedly examining whether Gordon Brothers has complied with its legal obligations, following reports that it rejected an offer that could have prevented Poundland from entering administration.

Reynolds said the owners had “serious questions to answer” if a viable rescue proposal had been turned down.

Poundland’s directors filed a notice of intention to appoint administrators last week, giving the business temporary protection from creditors while efforts to secure its future continue.

It is understood to have rejected a management-backed takeover proposal from Irish investment firm Martin Property Group following a dispute over the repayment of a £30m shareholder loan.

Gordon Brothers reportedly demanded the loan be repaid upfront, despite acquiring it for just £1 as part of its takeover of Poundland.

The uncertainty comes despite signs of improving trading at the discount retailer, with sales reportedly rising 6.7 per cent in September and 8.4 per cent during the first three weeks of October.

Ministers are understood to be supporting efforts to find a buyer for the business, although the government is not expected to provide financial assistance.

A break-up of Poundland’s store estate is increasingly seen as a likely outcome, with Poundstretcher reportedly interested in acquiring almost half of its shops.

The Range, Iceland and Lidl are also understood to be considering individual locations, although any deal could still result in significant job losses.

Poundland founder Steve Smith has warned that a collapse could put as many as 30,000 jobs at risk across the wider retail supply chain.

Click here to sign up to Retail Gazette‘s free daily email newsletter