HMV’s share price soared this afternoon after it struck a deal with its bankers to gain some breathing room on its debt.

The struggling retailer reported that its banking syndicate has waived a covenant test on loans scheduled for 11 days time, pushing it back to April 2012.

The firm gained this headroom by renegotiating its deals with suppliers, which included issuing them warrants worth 2.5 per cent of HMV’s equity.

The warrants allow the suppliers to acquire a fixed number of HMV shares within a specific deadline, giving them the incentive to see HMV’s stock price rise.

In response to the deal, shares in HMV more than doubled within minutes, and are trading up 106.25 per cent at 4.95p at 2.20pm.

The retailer expects net debt of around £175 million to £180 million for the year to April 2012, and forecasts a £10 million loss, but it claims the new agreements will allow it to cut its debt by 50 per cent over two years.

Chief executive of HMV Simon Fox commented, ‘Today's announcement is enormously welcome. These developments represent a material improvement in our financial position relative to the statement we made at the time of our interim results.

‘The new relationship with our suppliers and the support of our banks will now enable HMV to focus all of its energies on serving the changing needs of its customers ever more effectively.’

David Joseph, chairman and CEO of Universal Music UK, said, ‘HMV is a vital part of the UK music industry and we are delighted that the support of the film studios and music companies is helping to secure its future.

‘We look forward to working closely with HMV in the years ahead.’