December 12, 2008 16:20

Zavvi calls in 'restructuring team' as Woolworths fallout spreads

Music and DVD store is unable to stock its stores or sell music online

Music and DVD store Zavvi has called in restructuring team Ernst & Young after its distributor, Entertainment UK, went into administration.

Zavvi was forced to suspend online trading after Entertainment UK, a subsidiary of Woolworths, went into administration on November 27.

Deloitte, the administrators of Entertainment UK, have moved Ernst & Young in to aid Zavvi, with the blessing of the music retailer's management team.

Ernst & Young are understood to be on stand-by if Zavvi cannot repay its debt of £106 million to Entertainment UK, reports The Times.

If that were to happen, 2,500 Zavvi staff would see their jobs threatened.

If Zavvi, which formerly traded under the Virgin brand were to enter into administration too, then former owner the Virgin Group (which sold the business last year) could be liable because it guaranteed Zavvi's orders with Entertainment UK.

In a separate move today (December 12), BBC News reports that 700 staff from Entertainment UK's head offices and distribution centres in Middlesex have been laid off.