The beleaguered fast-fashion empire Boohoo is facing a fresh financial squeeze as it turns to unorthodox and costly lenders to prop up its heavy debt load.

In moves likely to ratchet up tensions between the company and its arch-nemesis Mike Ashley, Boohoo is in talks about a debt package of up to £175m that City sources warn could come with punishing rates attached.

The Manchester-based group has held discussions about tapping the so-called high-yield loan market for £50m of the proposed total.

This could result in Boohoo having to pay interest rates in “the mid-teens,” according to debt specialists close to the situation. If confirmed, the bill would be much higher than for conventional sources of funding, such as bank loans.

It has also held discussions with so-called asset-backed lenders, who typically lend on more expensive terms than traditional commercial banks and take security over property, stock and intellectual property in case of insolvency.

The remaining £125m is expected to come from the refinancing of an existing two-year loan taken out in October last year. That agreement was attacked by those close to Mr Ashley, who is Boohoo’s biggest shareholder, as “the worst refinancing deal that a public company has done in living memory”.

City sources said the cost of the £125m debt is likely to increase too, as banks are expected to demand a higher price for the risks posed by Boohoo’s struggles. Its revenues plummeted 16pc in the year to February.

Boohoo’s latest debt talks come at a critical time as new boss Dan Finley attempts a turnaround with Mr Ashley circling.

Frasers Group has amassed a 29pc stake in Boohoo. Mr Ashley’s attempts to oust Boohoo’s co-founder Mahmud Kamani as executive chairman have been rejected by other investors, however.

Boohoo’s shares are trading close to historic lows of just 20p as Mr Kamani wrestles with rising costs, and attempts to contend with stiff competition from the likes of more nimble Chinese competitors Shein and Temu, along with second-hand websites such as Vinted.

In March, Boohoo announced that it was changing its name to Debenhams, four years after snapping up what remained of the department store chain after it collapsed into administration.

However, the attempted reset was overshadowed by a £40m charge for writing down surplus stock, which wiped a further 4pc off the shares. The name change was later opposed by Frasers Group but Boohoo said it would push ahead with it anyway.

Two years ago, Boohoo challenger Asos borrowed £275m from Bantry Bay, a firm backed by the hedge fund Elliott Advisors. Analysts said the three-year deal gave Asos more flexibility than the £350m facility it replaced but it came at a steep price in the form of an 11pc interest charge.