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The Virgin Radio and Scottish TV company had admitted last October that it was in danger of breaching the terms of its debt covenants. The new management team, which took over in March, has now come to a new arrangement with its syndicate of lenders, led by Royal Bank of Scotland.

The interest rate it pays on its debt has been increased by 0.75%, although the company would not disclose the rate itself. The maximum level of its borrowing facility has been increased to £193m. The facility will last until September 30 2008.

SMG may reduce its current £155m net debt by selling either or both of outdoor advertising business Primesight or cinema advertising business Pearl & Dean. The former is valued at around £60m but the latter is believed to be less attractive.

Both had been put up for auction by the previous management. The new team of chief executive Rob Woodward and chairman Richard Findlay are expected to provide an update at the company's interim results this Thursday.

Brokers expect the results to show profits down from £18.8m to around £11.5m.