Quintain has agreed an extension to the covenants on its £620m debt facilities.

The listed developer and fund manager said this morning that the agreement had secured three years' headroom ‘to absorb further falls in valuation that may occur’ by enabling it to elect to extend its gearing from 110% to 150%.

The news was greeted enthusiastically by the City, which marked the shares up 25% to 19.5p this morning.

Of the five and six year bilateral £620m facilities it entered in to in March last year, it has currently drawn down £460m, leaving a remaining £120m.

It said that it was compliant with its covenants but considered it ‘important to secure the option to relax its gearing limit in the current economic environment.’

The agreement was described by Quintain as ‘cost effective’ and will see it pay a yearly fee of 1% which will be excluded from the interest cover calculation.

If Quintain decides not to increase its gearing limit in any particular year, the current average interest margin of 1.15% will increase after by 0.25% a year.

It added that further increases to the margin of between 0.85% and 2.35% a year, dependent on the level of gearing and commitment fees to half the applicable margin, will apply only if gearing rises above 110%.

Rebecca Worthington, Quintain’s finance director, said: ‘This simple, cost effective arrangement provides flexibility to the company during these volatile times.’