Banks have agreed to give Fisher & Paykel Appliances some breathing space after it reduced its debt.

The listed manufacturer will now revert to a total leverage ratio covenant. Total leverage ratio tests, a ratio of total bank debt to earnings, would be carried out on a monthly basis, the company said.

The new arrangement would see the total leverage tests change to quarterly if the ratio remained below a certain level for three months in a row.

Last May the company completed renegotiation of its long-term debt of about $575 million.

A banking covenant regime required repayment of $235 million by April 30 this year. That amount was fully repaid by last October - six months early - and as a result net debt fell from its peak of $502 million last May and is expected to go below $200 million by Thursday.

"We went through some real turmoil last year and this is just seeing us return to normal banking conditions," said chief executive Stuart Broadhurst.

He said the banks' response to the increased debt had been an overreaction caused by the dark economic climate.

F&P Appliances closed up 1c at 61c yesterday.