Value fashion retailer Matalan has paid back more than £47 million of debt to its banks ahead of schedule and has strongly rebuffed speculation that it was heading for a financial crunch

Some observers claim that Matalan, which was taken private by founder John Hargreaves in December in a deal worth£187 million, has suffered from sluggish growth and flat sales in the wake of competition from the expansion of other high street value chains such as Primark, Peacocks and New Look.

Matalan chief executive Alastair McGeorge told Retail Week that speculation that the company was in financial difficulty were “rubbish”. He said: “We are well ahead on our debt repayments.”

It is understood that the retailer paid back more than£47 million of debt before the end of July.

McGeorge added that Kaupthing, the Icelandic bank that advised on the deal and lent Hargreaves more than£430 million to fund the takeover, was not concerned about current trading at the discount retailer, which is believed to be down double digits. “We are on track to hit targets,” said McGeorge.

A source close to the retailer said: “The business is on track and the management is pleased with its first half under private ownership, but it is early days.”

In February, Matalan axed more than 100 jobs, three months after it was taken private, as part of a drive instigated by McGeorge to cut costs by 10 per cent. McGeorge is expected to reveal the results of a strategic review before the end of the year.

McGeorge is believed to have set himself the tough target of returning the business to similar level of profitability as achieved in the early part of this decade, when Matalan recorded profits of more than£100 million.

Pre-tax profits for the year to February 25, 2006 were£56.7 million.

Matalan trades from 5 million sq ft (464,500 sq m) of retail space in more than 190 stores.