Oaktree Capital, the US distressed debt fund, is in talks to take control of Countrywide, the UK's biggest residential estate agency, indicating that some investors feel conditions in the UK property market may be looking up.

Oaktree, which has built a stake in Countrywide's bonds, has been in talks with Apollo Management, the US buy-out fund that bought Countrywide for £1.01bn in 2007, and other creditors over a deal to cut its £740m debt by 75% and give the group a £75m cash boost to provide it with sufficient funds to survive the downturn.

The proposal, which requires the approval of 75% of creditors, could be the first of many take-overs of UK companies by distressed debt funds that have taken strategic positions in their debt in this new wave of corporate restructurings, a strategy known as 'loan to own'.

It would be the first such deal out of Oaktree's new €1.8bn (£1.6bn) fund, which it raised last year for investing in European distressed situations for control.

Countrywide said the proposal would allow it to 'expand its operations by opportunistically acquiring attractive estate agency businesses that may become available given depressed industry conditions', and intended to approve the deal subject to further analysis.

The proposal has the support of more than 50 per cent of the outstanding bond debt. The company is postponing interest payments on its secured bonds.

Countrywide has been hit by the housing slump, but said while it had made cost cuts, creditors 'concluded the current capital structure, and in particular the level of debt, is no longer sustainable and that a significant recapitalisation of the company's balance sheet is necessary to enable Countrywide to fulfil its potential'.

Financial Times