The Sunday Tribune has learned that the board was told in December by the Dublin Airport Authority, the hotel chain's owner, that the DAA would be reviewing its policy of not charging interest on a 30m inter-company loan. The board was asked to come up with a viable financial plan.

At a board meeting on 27 January, the Great Southern directors decided they had "no option but to resolve to sell the group" to protect themselves from accusations of reckless trading, Cullen told ministers last Tuesday.

The board believed a sale was in the best interest of shareholders, he said.

The decision of the Great Southern directors that a sale was the only way forward was endorsed at a DAA board meeting last Monday. The following day, ministers were told Great Southern had borrowings of 40m, and that losses for 2006 would be 7m 8m. It is understood that a loss of over 7m predicted by the Great Southern board factors in the potential cost of having to pay interest on the loan from its parent company.

Cullen also told the cabinet that a 40% cut in staff numbers would be required across to bring staffing levels in the hotel group into line with the industry norm. Last week, it was revealed that the ratio of staff costs to turnover in the chain was 46% in 2004, compared with an industry norm of 34% or less.

Of the group's hotels, only two airport properties are performing reasonably well, Cullen told the cabinet, with the Corrib hotel in Galway and Great Southern in Rosslare proving the most serious drain on resources. The three classic hotels, in Parknasilla, Killarney and Eyre Square, require major capital investment. Overall, capital investment of 80m is required.

The cabinet was told that if losses continued to mount, the image of the Great Southern group would be damaged, with a knock-on effect on its value. In the view of the boards of the Great Southern and the Dublin Airport Authority, a well-managed disposal programme was needed, Cullen said. This should be "targeted at potential hotel operators who specialise in the niche markets appropriate to the various hotels".

Advisers are expected to be appointed in the next fortnight to handle the sale, but it is not yet clear whether the business will be sold as a single entity or in several lots.