JOHNSTON PRESS, the listed Edinburgh-based media group with significant regional newspaper assets in Ireland, has agreed a deal with lenders to defer a test of its banking covenants until August 31st.

This boosted confidence that the company will be able to renegotiate its substantial borrowings.

“Yesterday’s deferral should give the group breathing space to explore various options in refinancing and/or reducing the absolute level of net debt,” said Dominic Buch, an analyst at Numis Securities in London.

The new debt agreement will have “relaxed” covenants, Johnston Press chief financial officer Stuart Paterson said yesterday.

While talks with lenders are ongoing, the company will have longer to pay back debt, and the new agreement will take account of the cyclical nature of advertising revenue, Mr Paterson said.

The publisher is renegotiating the terms of its debt, which stood at £448 million (€525 million) at the end of April, after failing to sell its Irish newspapers business last month because the bids were too low.

It is understood businessman Richard Findlay, who led Scottish Radio Holdings when it owned newspaper and radio assets in Ireland, tabled the highest bid for Johnston Press’s titles here.

Mr Findlay is believed to have offered between €30 million and €35 million for the 13 titles, which include the Kilkenny People, Limerick Leaderand Leinster Leader.

Johnston would not name the specific lenders that are party to the agreement on the covenants but a spokesman said they were among the “largest” of the UK’s clearing banks.

The company said on May 13th that it would cut jobs and close titles to help cut costs as it struggles with plunging revenue from advertising. It also warned that its 2009 operating profit would be towards the lower end of market expectations.