HMV secures refinancing deal
A NATIONAL high street retailer struggling against the online sale of CDs and DVDs has secured its short-term future after striking a refinancing deal with the banks.
HMV reached a deal with its lenders, including taxpayer-backed Lloyds Banking Group and Royal Bank of Scotland, to extend it a �220million loan over the next two years.
The group, which owns 731 HMV, Waterstone’s and Fopp stores, has so far closed 22 out of 60 stores it has earmarked for closure this year, but none of the 22 are in Suffolk or Essex. A spokesperson for the company said it was not in a position to say where the other 38 stores yet to close are located, but it did say these would “generally” be in areas where it had multiple stores.
However, as part of its efforts to revive its fortunes, the group plans to use a technology-led format, trialled at six stores - at Basingstoke, Crawley, Doncaster, Edinburgh, Guildford and Islington in London - and says it wants to convert another 150 shops to the new format by autumn.
The spokesperson said: “What I can say is that a number of our stores in the East Anglia/Suffolk region are earmarked to be upgraded into next generation stores that will feature an increased focus on personal technology products such as iPods, iPads, tablets, personal headphones/speakers etc, alongside the specialist mix of music, film and games that we are known for. We hope to announce these stores in due course, over the summer.”
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HMV’s deal with the banks includes issuing the lenders with warrants worth 5% of the company, which will be converted into shares next year.
HMV chief executive Simon Fox said: “We are very pleased to have concluded the new bank facility, which represents another important milestone in securing the financial stability of the group.”
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The group has issued three profit warnings this year, but its continued support from lenders follows the recent �53m sale of its book shop business, Waterstone’s, to Russian billionaire Alexander Mamut.
The new loan deal replaced the current lending facility of �240m, after the banks demanded that some proceeds from the Waterstone’s sale should be used to pay off some of its debt.
HMV will have to pay up to 14% on some of its loans by 2013 and dividends will not be paid to shareholders until one part of the loan has been repaid.
HMV has faced tough competition on its sales of CDs and DVDs as more consumers shop for them online and at supermarkets.
It hopes to turn around its fortunes by selling more hi-tech gadgets such as iPads and iPods and by growing its ticketing and festival business.
Shares in HMV rose by 8% following the loan deal announcement.