A trust connected to investment tycoon Robert Tchenguiz has abandoned its legal fight to retain £137m of proceeds from the sale of grocer Somerfield.

The Tchenguiz Discretionary Trust will surrender control of the cash to administrators of collapsed Icelandic bank Kaupthing following an out-of-court settlement, The Guardian reported.

The arrangement represents the latest Tchenguiz asset to be lost to Kaupthing’s administrators. Stakes in Sainsbury’s and pub group Mitchells & Butlers have already been relinquished.

The Tchenguiz Discretionary Trust had originally argued that the removal of the Somerfield stake from a collateral arrangement soon after Kaupthing’s fall in 2008 had been legally sound, relying on claims that a verbal agreement had been struck earlier in the year allowing the transfer of the Somerfield holding.

Neither Tchenguiz nor his R20 investment vehicle were defendants in the case.

Tchenguiz operations were Kaupthing’s biggest borrower, receiving loans of about £1.6bn from the bank.

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