Retailer The Talbots is nearing a global sourcing deal with Li & Fung and has secured extra funding from its parent company as its fourth quarter losses spiralled to US$136.3m.

Talbots majority shareholder Aeon has advanced the ailing women's wear retailer an extra $150m as a revolving loan facility, supplementing the company's existing $215m committed working capital facilities.

Meanwhile, The Talbots is also in advanced discussions with sourcing giant Li & Fung over a deal for the Hong Kong company to become the retailer's primary global sourcing agent.

The Talbots has signed a non-binding letter of intent with Li & Fung, arguing that a deal could simplify sourcing processes, reduce operating expenses and reduce the cost of goods sold.

The retailer announced a fourth quarter loss of $136.3m, including special items, compared to a loss of $10.3m for the same period last year.

For the full year, the loss was $144.5m, again including special items, compared to breaking even the year before.

Excluding the special items, the company recorded a loss of $123.9m, compared to a profit before exceptionals of $0.3m last year.

"Our fourth quarter results were affected by the steep decline in consumer spending resulting from the deterioration in US economic conditions," said Trudy F Sullivan, president and CEO of The Talbots.

"Our priority during these difficult times will continue to be addressing those areas within our control, including streamlining our business and tight management of our costs and inventory, while continuing with an acute focus on those measures which improve our cash flow and liquidity."

The Talbots said the extra $150m would be used for general corporate and working capital purposes.

The company has announced a raft of cost-cutting measures in recent months, including the axing of 370 jobs in February, reduced working hours, changes to employee benefits, cuts to overheads and store closures.

It is trying to sell its J Jill store chain and has also announced a near-halving of capital expenditure this year.

The company had previously said that fourth quarter sales fell 23.4%, with full-year revenues down 12.5%.