HMV consults KPMG over debts
By CMU Editorial | Published on Thursday 20 January 2011
HMV last night confirmed it has hired a team of specialist advisers from accountants KPMG to help sort out issues surrounding its debts.
As previously reported, after disappointing pre-Christmas trading figures for the HMV stores, there have been concerns that the music and entertainment retail company won’t meet covenants set out in its loan agreements. Said concerns have led to some insurers refusing to provide the retailer’s suppliers with credit insurance, which covers the risk suppliers take when they provide HMV with stock on credit. News of the credit insurance issues on Tuesday night caused the retail firm’s share price to fall to an all time low yesterday.
HMV has just over £150 million in debts, nearly half of which stem from its acquisition of the MAMA Group at the start of last year. If HMV fails to meet performance targets set out in the covenants of its loan agreements, its money-lenders could cancel the loans, or more likely demand higher interest and fees. The Daily Mail reckons that KPMG’s consultants might try to renegotiate the terms of HMV’s loan agreements with its money lenders in order to ensure covenant tests aren’t failed later this spring.
HMV top man Simon Fox was keen to stress last night that his company makes use of debt specialists on a regular basis, so KPMG’s involvement now isn’t too out of the ordinary, though presumably the demands of their task are slightly more pressing than usual. He told reporters: “We have received specialist debt advice for every year since the group was formed in 1998 and, given our recent statement on debt covenants, the company will continue to take this type of advice as prudently appropriate”.
As previously reported, the credit insurance issue puts more risk onto record companies, DVD and game publishers and their distributors when they supply stock to HMV, and could in theory lead to some suppliers refusing to hand over goods without payment upfront. That said, as also previously reported, HMV is now so important to the entertainment retail sector – as the only national specialist entertainment retailer left – that it seems likely most suppliers will continue to do business with the company.
Reps for both Sony Music and the distribution business owned by Chrysalis Music, Lasgo Chrysalis, both confirmed they would continue to supply HMV to the Mail yesterday, with the CEO of the latter, Peter Lassman, telling the paper: “I can tell you it is business as usual, they enjoy our full support and we are not concerned about them going out of business. Companies go through problems some of the time and that does not mean they are bad companies”.