RPT-Karen Millen owner in crucial debt talks - paper

(Repeats to additional Reuters clients)

LONDON, Jan 4 (Reuters) - Mosaic, the owner of the Karen Millen, Oasis and Principles fashion brands, is to begin talks with its lenders, further evidence of the gloom on Britain's shopping streets, the Sunday Times reported.

The company, backed by Icelandic investor Baugur, has been hit by the withdrawal of credit insurance and some suppliers are demanding upfront payments, the paper said.

"We don't see any immediate cash-flow issues in the business. There is no likelihood that Mosaic will go into administration," the paper cited a source close to Baugur as saying.

No-one at Baugur was immediately available for comment on Sunday.

Trading updates from Marks & Spencer (MKS.L), Next (NXT.L) and Debenhams (DEB.L) this week are expected to confirm British retailers face plunging sales and pressure on profits.

The slump in consumer spending has hit Britain's store groups hard, with sweets-to-DVDs chain Woolworths WLW.L, furniture group MFI and children's wear specialist Adams among those to fall into administration, a form of creditor protection, in recent weeks. (Reporting by Victoria Bryan; Editing by Sharon Lindores)