After setting up a fresh jenkins project for subversion I got the following error messages on the console:

[INFO] Executing: cmd.exe /X /C "svn --non-interactive update c:\jenkins\jobs\XmlTransformer_trunk\workspace"
[INFO] Working directory: c:\jenkins\jobs\XmlTransformer_trunk\workspace
Provider message:
The svn command failed.
Command output:
svn: OPTIONS of 'http://developbender/svn/dev/Sonic/bendit/Libraries/XmlTransformer/trunk': authorization failed: Could not authenticate to server: rejected Basic challenge (http://developbender)

I know that there are thousands of such reports, but I have tried everything to resolve this one without luck. Please note that I have installed hudson in parallel in the same Tomcat, which works perfectly without having this problem!
I could only assume that this might have to do with the earlier reported bug: JENKINS-12473 so that Jenkins does not give the credentials to subversion here.