LazyTown has moved to set the record straight following stories in The Sun and an Icelandic business weekly at the weekend saying that it was facing 'financial meltdown'.
LazyTown has said that it has already reached an agreement in principle with the bond holders and all details should be resolved before year-end.
The Sun's story stated that the Icelandic bosses of LazyTown owed £15 million - following the collapse of the Icelandic banks - and bond holders were taking legal action to retrieve the sum.
However, LazyTown's statement said: "The LazyTown brand is strong and is generating income that fully covers the daily operations of the business today. LazyTown reaches 500 million homes in 128 countries and research shows that it is well known among children the world over.
"We have a lot of positive news in the LazyTown business. The income is generated from over 7,000 skus. Our structure has been simplified and operational results are improving contrary to what is happening in the industry in general during this economic downturn."