Champion horse trainer Paul Nicholls of Ditcheat could be forced to search for new backers after it emerged major sponsor Connaught PLC has hit financial trouble.

Shares in the company have dropped 90 per cent since warning of a loss in revenue of £200 million thanks to Government spending delays a month ago.

The Exeter-based company repairs and maintains social housing throughout the country and the increased level of debt has been partly blamed on heavy pressure from suppliers, with many demanding advance payments from the firm.

The Somerset stable has enjoyed a successful relationship with Connaught, their biggest sponsor.

Mr Nicholls has dominated National Hunt racing in recent years, winning the champion trainer title for the last five seasons.

More than 140 horses are on the books at the Manor Farm stables in Ditcheat.

Despite Connaught's poor performance on the markets, Mr Nicholls is hopeful they will honour their sponsorship agreement with the stable. He said: "We have an ongoing sponsorship contract, which ends in May 2013 and as far as we are concerned it is business as usual.

"We have had a great association with Connaught over the years, and we look forward to that continuing."

Connaught has around 180 multimillion-pound social housing contracts within the UK.

Public confirmation came last week that the firm would breach banking covenants after warning its debts would be well over the advised level of £120m by the end of August.

The covenant believed to have been breached is that net debt must be less than three times adjusted earnings before interest, tax, depreciation and amortisation.

Connaught's debt looks likely to exceed £200m and the company has entered talks with banks about securing additional funding.

Four new directors have been brought in by chairman Sir Roy Gardner to steer them through the crisis.