HMV to Appoint Administrators; Over 4,000 Jobs Under Threat
Ailing music and entertainment retailer HMV is to suspend the trading of its shares and enter administration, the U.K. equivalent of Chapter 11 bank protection, the company has confirmed.
The troubled music company is the U.K.'s last major high street music retailer and has over 230 brick and mortar HMV stores in the United Kingdom and Ireland along with 9 Fopp outlets. It also has a 50% holding in U.K. digital retailer 7digital, which powers its own digital offering HMV.com.
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In a statement released late evening GMT Jan. 14, HMV announced that it was to suspend trading of its ordinary shares with immediate effect and proposed that Deloitte LLP is to be appointed as the administrators of the Company and its subsidiaries, placing over 4,300 jobs at risk.
"The Board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection, and in the circumstances therefore intends to file notice to appoint administrators to the Company and certain of its subsidiaries with immediate effect," HMV confirmed in a statement.
"The Directors of the Company understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business," the statement went on to say.
While the news is a huge blow to the U.K. music industry, it is not unexpected. In December, HMV warned that it was likely to breach its January banking covenants with chief executive Trevor Moore warning that "current market trading conditions result in material uncertainties facing the business."
The company's most recent financial results, which accounted for the six months ending Oct. 27, reported a £36.1 million ($58.5 million) first-half loss, with total sales falling 13.5% to £288.6 million ($467.7 million), from £333.7 million ($540.8 million) the previous year. Despite selling a number of its live assets throughout 2012, including flagship venue, London's Hammersmith Apollo, to American-German joint venture Stage C for £32 million ($51.9 million), HMV Group's underlying net debt remained £176.1 million ($285.4 million), according to December's Interim Results.
The same month saw New York-based investment group Apollo Global Management reportedly buy a 10% holding in the troubled retailer - approximately £20 million ($32.4 million) - with a possible view to acquiring the company.
HMV is yet to disclose its performance during the crucial holiday trading period and recently launched a U.K.-wide promotional sale to boost its finances.
According to the Financial Times, a week prior to today's (Jan. 14) announcement, HMV unsuccessfully asked its suppliers, including music labels, for approximately £300 million ($482 million) in additional financing to pay off its bank debt and fund an overhaul of the company's business model.
The first HMV store was opened in 1921 on London's Oxford Street by composer Sir Edward Elgar.