HMV Calls in Administrators as Rescue Talks Founder
UK music and entertainment retailer HMV, which opened its first store in London in 1921, has called in administrators after efforts to stem declining sales failed. The group has appointed Deloitte as administrator, which has been acting as advisor to HMV’s consortium of lenders, led by Lloyds Banking Group and Royal Bank of Scotland (RBS).
The group recently asked its suppliers, who a year ago took a 5% stake in the group to support it, for around £300m in additional financing to pay off its bank debt and fund a restructuring of its business model, but its request was turned down.
HMV held talks with its banks over the weekend in an attempt to agree new terms for its debt, but the treasury was unable to find a solution, leading the group to announce late yesterday that: “The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection and in the circumstances therefore intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect.
“The directors understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business.” Although its stores are likely to remain open, HMV said they would no longer issue or accept gift vouchers and trading in its shares has been suspended.
Recent reports suggested that Apollo Global Management could be preparing a bid after the US vulture fund bought 6% of HMV’s bank debt two weeks ago, but restructuring company Hilco is now regarded as a more likely bidder. Hilco bought HMV Canada from the UK parent in 2011 and recent sales were ahead of expectations.
HMV’s UK operations, by contrast, have struggled as demand for CDs, DVDs and games has declined, while increasing competition from Amazon and other internet retailers as well as digital downloading, have further eroded its sales. It bought some additional time last May by selling its Hammersmith Apollo music venue to a consortium for £32m, enabling the treasury to extend its £220m bank facility. However, the group warned last month that it was likely to breach its banking agreements after a weak start to Christmas trading and even a 25% discount offer on products last weekend failed to boost trading.
HMV’s chief executive officer (CEO), Trevor Moore, was previously CEO of UK cameras and photography chain Jessops, which has also struggled for survival and finally went into liquidation last week with the loss of 2,000 jobs.