The newspaper giant said in a statement in March that its ability to trade going forward was conditional on either a disposal of its Irish titles or the refinancing of its debt.

This morning in a statement to the Stock Exchange, the company said that "the sale process being conducted to dispose of the Republic of Ireland titles has now been terminated".

It added that the "considerable interest" from buyers had not resulted in a "sufficiently high price".

Now, the group must renegotiate its banking conditions to avoid breaching its covenants.

It said that discussions have "so far been constructive and supportive" and forecast the completion of discussions by late August.

Its share price has fallen by 30% on the news, suggesting that the market was anticipating a successful resolution of a sale.

The bombshell came as the group disclosed that there has been "greater stability" in advertising revenue over the past 19 weeks compared to the second half of 2008.

Over the period, advertising rates were down 34.4% year-on-year, compared with 35.59% in the first nine weeks of the year.

John Fry, Johnston's chief executive, who was appointed in January, said: "While our market remains fragile, we have seen some stability in advertising revenue over recent weeks, our cost reduction programme is on track, and we are making good progress in the discussions with our debt providers.

"This gives us encouragement that we will be well placed to benefit from any recovery in the economy as and when it emerges."

See also:

'Three buyers in running' to buy Johnston Irish arm
Profits down at Johnston Press and it warns of going concern threats