New Star Asset Management, the London-based funds house hit hard by plunging markets and investor outflows, has agreed to pay more interest on its debts after its assets under management continued to fall in the third quarter and analysts voiced fears that it could breach its banking covenants.

The company has renegotiated terms on its loan "to better accommodate the current unsettled trading environment", according to its interim management statement published today. The interest on its debt has increased by 1.5% to 9.25%, according to a spokesman. The debt is repayable as a single payment in June 2013.