Aurum, the jewellery group formerly backed by Baugur, has agreed a debt for equity swap with lenders and said recent performance has been ahead of expectations.

The retailer, owner of the Goldsmiths, Watches of Switzerland and Mappin & Webb chains, agreed a £42m conversion of debt into equity with Icelandic bank Landsbanki.

Aurum has also agreed a seven-year £10m mezzanine loan which it said would reduce short-term borrowings.

The retailer’s management now own 33% of the business and the remained is held by institutional investors.

In the year to February 1, Aurum reported EBITDA down to £8m from £13m on revenues 2% up to £266m. The profit fall was mainly attributed to “increased promotional activity and market disruption” last Christmas.

The 26 week to August 2, however, delivered results above management expectations despite a like-for-like sales fall of 2.4%.

Aurum agreed a deal with Harrods to come out of the famous Knightsbridge store which “resulted in a negative impact on year-on-year sales and profits but a positive impact on margin and cashflow.” Sales fell from £135.3m to £122.7m during the period.

Aurum chairman Don McCarthy was “delighted” with the financial restructuring. He said: “This is the perfect launch pad for our growth plan. The management is dedicated to consolidating our strength in watches while growing our gem and gold management business.”

Chief executive Justin Stead said: “Due to the current economic uncertainty we remain cautions but optimistic for the remainder of the year.”