HMV, the beleaguered entertainment chain, is set to bring down the curtain on nearly 100 years of history by filing for insolvency, marking a grisly start to the new year for the high street with thousands of expected job losses.
The 236-store retailer of CDs, DVDs and computer games will file a notice of intention to appoint the accountancy firm Deloitte as administrator after HMV’s banks and suppliers ran out of patience.
The demise of 92-year-old HMV, which employs 4,350 staff, comes just days after the camera chain Jessops shut all its 187 stores and the electrical retailer Comet disappeared from the high street before Christmas. All three chains had been hammered by the inexorable shift to consumers buying their products online and cut-throat competition from supermarkets.
The explosion in digital downloading compounded HMV’s problems, as UK consumers spent more than £1bn on downloaded films, music and games in 2012, according to the Entertainment Retailers Association.
Following torrid trading before Christmas, HMV last week reportedly pleaded with its suppliers, including the world’s biggest music labels, games makers and film studios, for £300m of additional funding to pay off its debt mountain, as part of a radical restructuring of its business.
But this lifeline was rejected. By filing a notice of intention to appoint Deloitte, HMV – whose chief executive is Trevor Moore, the former boss of Jessops – is not yet in administration. But it has just 10 working days to hammer out a rescue deal before the seemingly inevitable formal insolvency takes effect.
HMV had been battling for its life since it issued a “going concern†warning before Christmas and said it would almost certainly breach bank debt tests at the end of this month. This followed a 10.2 per cent slump in sales and its net debt rising to £176.1m over the six months to the end of October.
The restructuring specialist Hilco could be interested in acquiring HMV UK out of administration and keeping a slimmed-down version on the high street. Hilco has delivered a turnaround at HMV Canada, which it bought in 2011. It is also possible that Apollo, the US private equity firm, may come back to look at HMV if, as expected, it falls into administration. Apollo bought six per cent of HMV’s bank debt two weeks ago but yesterday people familiar with the situation said it had no intention to make an offer for the UK chain. Both Hilco and Apollo declined to comment last night.
The composer Sir Edward Elgar opened the inaugural HMV store on London’s Oxford Street in 1921. HMV stands for “his master’s voice†and the retailer is synonymous with Nipper, the Jack Russell dog in its logo.
HMV had been in crisis talks with its eight-strong-banking syndicate, including Royal Bank of Scotland, Lloyds, ING, Santander and Sweden’s Handelsbanken, for weeks. Shares in HMV fell to 1.1p yesterday, giving it a market value of just £5.1m.
As recently as August, HMV had forecast it would make profits of £10m this financial year but its fate is likely to be soon in the hands of its administrators.
HMV said it was the intention of the administrators, once appointed, to continue to trade the stores while they seek a purchaser for the business.
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