HMV has been given a lifeline by its banks as it has secured a new two-year refinancing plan worth £220m.

The revised plan, which runs until September 30 2013 with interest paid at 4% over LIBOR, includes issuing lenders with warrants worth 5% of the embattled retailer, which will be converted into shares next year.

Last month HMV Group sold the Waterstone’s book chain for £53m to Russian billionaire Alexander Mamut.

Chief executive Simon Fox said: “We are very pleased to have concluded the new bank facility, which represents another important milestone in securing the financial stability of the group.”

HMV said current trends in trading remain in line with results reported on May 20, when the retailer said like-for-likes at the HMV chain were down 15.1%.

HMV’s main lenders are Royal Bank of Scotland and Lloyds Banking Group. The rescue package is made up of a £70m loan, a £90m loan and a £60m credit facility, which can be called upon if needed. The retailer faces an “exit fee” due on the £90m loan when it is repaid, which would rise to 14% by January 2013 if the loan has not been repaid by then.