An HMV lifeline, sharing the loss.

Interesting story in the press about HMV and the potential cost to others from a shared liability with its suppliers should the High Street minnow go under. It could be as much as £150 million owed due to an old agreement made when HMV was part of EMI.

EMI guaranteed rental agreements on HMV stores when the retailer was spun out of the record label in 1998. It is understood that Universal then assumed these guarantees when it acquired troubled EMI.

The bill would only reach £150m if HMV collapsed into administration and the stores were not re-let. However, the precarious state of Britain's high street means demand for shops is fragile. 

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9766168/HMV-survival-boost-from-suppliers-liable-for-150m.html

Perhaps this explains why some of  HMV's suppliers are keen for the last man standing on the High Street in entertainment retailing to survive and why just before Christmas they stepped in with financial help. It might be cheaper for them to continue to support the company as a loss making concern that might just turn things around in time. On the other hand, much will depend on the banks and whether they are prepared to keep the financial lifeline going after HMV reports to them in January.

Update, 31/12/12

This is an interesting development;

HMV’s lenders plan to block efforts by turnaround fund Apollo to buy the firm’s debt as they plot a revival of its fortunes.

Music industry sources said Apollo Global Management had been planning to buy the retailer’s debt, which would give it control of HMV.

Apollo has already acquired ten per cent of the debt and must now negotiate with about six banks.

However, the lenders are understood to be reluctant to sell their loans too cheaply and are still hopeful that HMV can survive without a takeover.

A source said: ‘There is a feeling among the banks that they have come this far, so let’s see it through.’

http://www.thisismoney.co.uk/money/news/article-2254598/Lenders-debt-battle-plan-HMV-revival.html?ito=feeds-newsxml