MORE than 1,600 jobs at beds giant Dreams have been saved after 171 of its shops were bought out of administration today.

However, the deal between Sun Capital Partners and administrator Ernst & Young (E&Y) leaves a further 400 jobs at risk as a buyer is still being sought for the remaining 95 shops, which will continue to trade for the time being.

The group, which has an outlet in Shrub Hill Retail Park, Tallow Hill, Worcester, has sold its head office at High Wycombe, Buckinghamshire, and two UK factories to Sun Capital Partners.

E&Y administrator Alan Hudson said: "High Street retailers have faced unprecedented conditions over recent years and the market for higher value discretionary purchases has been particularly tough.

"Dreams is a well-known market leader, but in common with many others has suffered as a result of this depressed retail environment, a rapid expansion of its store portfolio and onerous lease liabilities."

He said that while its recent performance had improved, it had seen a decline in like-for-like sales and squeezed operating margins.

Administrators said Sun Capital Partners, which already owns sofa chain SCS Upholstery, will honour warranties.

Orders where part-payment deposits have been made for goods will also be met.

Private equity firm Exponent acquired Dreams from its founder Mike Clare in 2008 in a deal worth more than £200 million.

Mr Clare reportedly wanted to win the business back and keep all the stores open, but was turned down by lenders Royal Bank of Scotland and Barclays.

He worked for several furniture firms before setting up a sofa bed shop in Uxbridge, Middlesex, in 1986.

The father-of-four remortgaged his home with his wife to start the company and a year later they opened the first Dreams store after adding beds to the range.

In 2006 Dreams opened an 84,000 sq ft bed factory in Oldbury, West Midlands. Its other factory is in Warrington, Cheshire.

It comes after a recent run of high-profile administrations which have seen the closure of all Comet and Jessops stores and a number of HMV and Blockbuster shops.

Sun Capital Partners also bought fashion chain Bonmarche, which was part of the Peacock Group, last year after it collapsed into administration.

The US-headquartered firm has invested in more than 315 companies around the world since its was founded in in 1995.