January 14, 2013 20:38
HMV to go into administration
The chain is refused a £300 million loan to keep it afloat
High street music, DVD and computer games retailer HMV has confirmed that it is going into administration.
A statement released overnight reads: "It is proposed that Nick Edwards, Neville Kahn and Rob Harding, partners of Deloitte LLP, will be appointed as the administrators of the Company and certain of its subsidiaries. The Company's ordinary shares will be suspended from trading on the London Stock Exchange with immediate effect."
The Financial Times wrote that the chain's suppliers, including record labels, computer games makers and film companies, recently refused to give the business a £300 million loan to keep them afloat.
The money would have gone to paying off the company's debt as well as to helping change the way the business is run.
Over 4,000 jobs are now at risk as administrators Deloitte attempt to seek a buyer for the company and secure a long term future for the high street retailer, which has around 250 branches nationwide. Branches will no longer accept gift cards/vouchers or issue them, as confirmed this morning (Jan 15).
One of the biggest worries for many in the music industry is how the demise of HMV could affect independent labels. With few small shops outside of major cities left, the retailer is a vital life source for smaller bands and artists hoping to have their music distributed nationwide. In fact, 38% of physical music on the high street is sold through HMV. Posting on Twitter, former Rough Trade East manager Spencer Hickman shared the fact that "in the UK in 2012 94% of video revenue, 65% of games revenue and 62% of music revenue came on physical formats," a worrying statistic for the music industry facing a future with limited visibility on the high street.
The Guardian suggests that restructuring company Hilco could be a potential life line for the debt-ridden company. Hilco purchased the Canadian arm of HMV in 2011 and beat sales targets over Christmas, making £40.5m over the festive period.
Meanwhile, writing for the BBC, Robert Peston states: "The outlook looks considerably better than for other recently kaput store groups. And the reason, according to influential sources close to HMV, is that the music industry and the film industry want its survival, albeit they recognise that will have to be with fewer stores and with fewer locations. Record labels and DVD distributors don't want to be wholly dependent for sales on Amazon and Apple's iTunes. So Deloitte is working on the assumption that these important suppliers will help the creation of a slimmed-down and viable HMV."
"This is unlikely to involve these suppliers actually buying HMV out of administration. Much more likely is that they would provide easy credit terms to a buyer - which will very likely be a private equity group (right now, again, there is too much money in private equity chasing too few deals)."
At the end of last year, HMV sold its live music assets to a the private equity arm of Lloyds Banking Group in a £7.3 million deal. HMV purchased MAMA Group in 2010 for £46 million but offloaded a number of venues - including the London establishments the Barfly and Jazz Café, the Manchester Ritz and Lovebox festival – to offload its debts. The sale also included the Great Escape and Global Gathering festivals and HMV's 50% interest in its Mean Fiddler joint venture with MAMA. HMV sold another of its live music ventures, the Hammersmith Apollo, in a £32 million deal in 2012.
See below for Twitter users memories of HMV.