HMV lenders resisting Apollo approach
By CMU Editorial | Published on Monday 31 December 2012
Most of HMV’s money lenders are currently resisting efforts by Wall Street firm Apollo Global Management to buy up the debts of the flagging entertainment retailer, according to the Mail On Sunday.
As previously reported, earlier this month Apollo acquired in the region of £20 million, or 10%, of HMV’s debts off the Allied Irish Bank. While the finance group’s intentions aren’t really known, it is thought that Apollo might be planning to seize control of HMV by acquiring the majority of its debts, with a view to taking the company into private ownership, either to asset strip or to downsize and restructure the HMV business into something more viable longterm.
However, according to the Mail, most of HMV’s money lenders – about six other banks – are so far resisting offers from Apollo to buy the retailer’s debts, though mainly because of the price being offered by the Wall Street equity firm, which is predictably low. It seems that most of the banks to which HMV owes money currently don’t see a firesale of debts to Apollo as the best case scenario, even though the retail company is set to break covenant terms on some of its debts next month. The Mail cites a source as saying: “There is a feeling among the banks that they have come this far, so let’s see it through”.
Incredibly favourable supplier terms from the major music and DVD companies is currently helping HMV to continue operating, despite sales in its stores continuing to slide, and with only its stake in 7digital left to sell. Attempts by HMV management to renegotiate loan terms with the banks are ongoing, making January another make or break moment for the retailer. Apollo’s ability to increase its stake in HMV debt and how it intends to use any power it acquires will play an important role in that moment.