House of Fraser chairman Don McCarthy has written to suppliers to reassure them that the Baugur-backed department store business is financially robust.

The move follows speculation that the nationalisation of Iceland’s third-largest bank Glitnir and the administration of Stodir - an investment company controlled by Baugur chairman Jon Asgeir Johannesson - will have an adverse impact on investor Baugur and its UK retail portfolio.

"There has been continued coverage in the media on the economic crisis in Iceland and speculation of what impact this may have on Baugur," McCarthy wrote in a letter seen by the Telegraph.

"House of Fraser would like to clarify that these issues have no impact on the strength of its business, its operations or its trading performance."

House of Fraser was acquired in November 2006 by a Baugur-backed consortium Highland Group.

McCarthy, who is also a Baugur shareholder, described Highland Group Holdings as "a consortium of investors in which Baugur is a non controlling partner".

He added that the relationship between Baugur and House of Fraser is “solely that of a supportive shareholder".

"There is no day-to-day trading relationship between House of Fraser and Baugur and the relationship between the two companies cannot impact directly on the operations of the House of Fraser business," he said.

House of Fraser has already repaid and or cancelled over£110 million of the debt arranged at the time of the acquisition due to “the financial strength of the company and its ability to generate strong cash flows", he added.