The Halifax Bank of Scotland (HBOS) will convert Miller Fisher Group's bank debt into shares, making it a dominant shareholder in the troubled loss adjuster, Insurance Times has learned.

A market source said: "HBOS is subscribing for a chunk of equity in Miller Fisher."

The source said Miller Fisher was waiting on stock market approval but is expected to make an announcement on the deal later this week.

HBOS would receive convertible preference shares, the source said.

It is believed the deal could lead to changes in the company's leadership and operations.

On 3 December Miller Fisher's shares were worth 3p, down from a 52-week high of 27.5p.

According to its 2000 annual report - the company has more than £22m in bank loans, the majority believed to be with Halifax - and a total debt of £24.8m.

The group, which released its first-half 2001 figures two weeks late, reported an 11% fall in turnover to £26.4m from £29.6m.

It reported a £0.6m loss for the period, which was an improvement on the same period last year, during which there were losses of £1.2m.

Miller Fisher has suffered a series of blows over the past year.

It was rumoured to be in failed merger talks with Capita and was dropped from the panels of Groupama and Pearl.

However, at the time of its interim results, finance director Richard Horton was positive.

"The business is now in better shape [and] with our cost savings in place, our focus now will be on revenues and restoring the business margins," he said.

The company already planned to concentrate on its successful Irish subsidiary, Miller Farrell, its third-party claims administration business and its construction adjusting arm.