HMV has signed a new deal with its main music and film suppliers, which means they get 2.5% of shares in the business. This should help HMV shed half of its £180m debts over the next three years. In response to the deal, its banks have waived the covenant test that was due in two weeks' time. This means the company has more time to sort out its debt problems, delaying the banks from recalling their loans.
The announcement has come just in time for the troubled entertainment retailer, which posted four profit warnings last year and reported a like-for-like sales drop of 8.1% over the Christmas period. Chief executive Simon Fox said the announcement today was ‘enormously welcome’, although he still remains upbeat about the firm’s future. While sales of DVDs and CDs have slumped as competition from supermarkets and online sites gathers steam, HMV has focused on selling technology and accessories such as headphones and tablets. The latest figures show technology sales were up by more than half. It also sold Waterstone’s and its Canadian arm last year, and has put its live music business up for sale.
HMV’s sigh of relief comes just days after Peacocks became the biggest retailer since Woolworths to go into administration, putting almost 10,000 jobs at risk. Past Times and La Senza have also recently gone into administration. HMV has avoided becoming the latest major casualty of the high street – for now.