TalkTalk is currently attempting to raise £450m from the sale of a large stake in its wholesale arm to Australian investment giant Macquarie.
The proceeds from any disposal have been earmarked to help pay off some of the debt pile and avert a default.
Analysts have previously raised concerns about the value of the wholesale division, pointing out that it was largely dependent on TalkTalk’s own consumer business, which has been losing market share in the shift to full-fibre broadband.
The company’s losses more than doubled last year to £70m and the costs of servicing its debts jumped 35pc to £106m on the back of soaring interest rates.
Senior industry sources said that the alternative to the sale of the wholesale arm and an equity injection was a debt-for-equity swap in which lenders would take control. The private credit fund Ares Management is also exposed to TalkTalk debt and has called in restructuring specialists to advise on its options.
The fraught discussions threaten a rare setback for Sir Charles, a serial entrepreneur whose fortune was once estimated at £1bn largely from the sale of part of his stake in Carphone Warehouse when it merged with Dixons a decade ago. He is also a major investor in the British offshoot of the American burger chain Five Guys.
When Sir Charles teamed up with Toscafund, they tapped private credit fund Ares Management for hundreds of millions of pounds in high-risk financing that resulted in Ares becoming a major shareholder in TalkTalk, according to Companies House filings.
Though the so-called payment-in-kind loan isn’t due to be repaid until 2026, the interest has been accruing at an eye-watering annual compound rate of 13pc, which has pushed the amount owed up from £290m in 2022 to £380m in 2023 alone, according to the financial information service Debtwire.
In January, the credit ratings agency Fitch downgraded TalkTalk another notch to CCC, meaning a default is considered “a real possibility”.
Attempts to sell the wholesale arm are part of a broader break-up plan. In September, a syndicate of the group’s existing shareholders bought its business unit for £95m, and its consumer arm is also expected to be put up for sale. Management have also cut sales and marketing spend by 40pc in a bid to rein in costs.
TalkTalk declined to comment.