Jessops was forced to reassure the City today that it had not broken its banking covenants, as shares in the troubled high-street photography chain plunged by as much as 39 per cent.

A spokeswoman for the group, which closed more than 80 stores and eliminated 550 jobs two months ago, insisted that Jessops was not in difficulty with its lenders.

She said that the share price plunge may have been triggered by an unammed investor selling 600,000 shares in the business.

The spokeswoman told Times Online: “Jessops has definitely not breached its banking covenants and there has been no material change in trading.”

By mid-morning shares in the group had recovered slightly, but were still down more than 20 per cent, or 2.75p, to 10.75p. They started the year above the 150p mark.

Jessops agreed a new £66.5 million banking facility with HSBC in June, and analysts said that this should be enough to withstand a further downturn in trading over the summer.

One said: “There were rumours doing the rounds this morning that the chain has gone bust, but that’s not the case, and that’s why you’re seeing the shares pick up now.”

Richard Ratner, analyst at Seymour Pierce, said: "Trading would have had to have been mega-dire for them to breach their covenants. I mean we went back to the company in June and asked supposing it is bad over the summer have you got the cash to cover it, and they said yes."

Jessops, founded 70 years ago, has been hit hard by internet-based rivals as well as supermarkets selling cheap compact cameras and the rise of the mobile camera phone.

Two months ago, David Adams, the chairman, said that the combination of problems was a “perfect storm”.

The business was floated at 155p a share by ABN Amro three years ago.

The stores earmarked for closure represented a quarter of the group’s estate in the UK.

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