So, HMV yesterday confirmed to its investors that it had secured two years a new financing from its bankers, giving the flagging entertainment retailer a £210 million loan facility.
It means fears that HMV might breach terms of its existing loan agreements, causing all sorts of trouble, have been allayed. Though, City types were keen to point out yesterday, at a cost; that is to say the firm’s new banking agreements are expensive. So much so, while the group’s share price moved up on the announcement new loan terms had been agreed, it slipped down again later in the day once the detail of the new banking agreements had been digested by those who understand these things.
Said City types noted the high interest rates, the possible exit fees and the warrant that could give the banks a 5% stake in the company. Some were also concerned that this agreement would only run for two years, with some wondering whether – even with more secure funding in place – HMV CEO Simon Fox can turn round his company’s fortunes in such a short period of time.
That said, Fox would probably stress that his reinvention of the HMV business began a few years back, when he started diversifying the company into live music, artist management and digital fulfilment. That diversification resulted in most of the loans that have been causing him problems for the last year, problems that sort of put his grand plan for reinvention on hold. Now, with the new loan terms agreed, however harsh they may be, his transformation of the business, already two years in, can continue.
The potential of HMV’s operations in the live and management space remains good, especially if the company can figure out how to integrate its content and event assets. The big challenge, though, remains their high street stores, the biggest part of the company, and the weakest. Attempts to diversify the product range in those stores has had mixed results, though Fox insists the expansion of the tech and gadget product lines has proven successful, and will be a key priority moving forward.
Whether the expansion of tech departments will be enough to rescue the HMV high street operation – especially in bigger cities where competition in that domain is high – remains to be seen. The bankers were reportedly impressed with this strategy.
Either way, and despite the lukewarm reception in the City yesterday, Fox will be hoping that with the Waterstones sale and the new banking agreements, he and his top team can stop fire-fighting for a while and set about finishing the big revamp he initiated two years ago, slightly less in the spotlight. That said, with a music brand as seminal as HMV, the music industry and the mainstream media are likely to continue to keep a close eye on what’s going on at the last entertainment retailer on the high street.
Sections: Music Business - Top Stories | Tags: HMV, Simon Fox
Also from CMU...
HMV close to securing new loan deal
The HMV Group could be close to signing a new deal with its bankers, Lloyds and RBS, which will bring to an end the imminent uncertainty over the entertainment firm’s...
HMV admits it is likely to breach loan covenants
HMV issued its fourth profit warning in six months yesterday, and then admitted it is likely to fail loan covenant tests next month and announced its chairman was standing down....
UKRD makes loan to TLRC
Local radio company UKRD has provided its rival, The Local Radio Company, with a £1.5 million cash boost. As previously reported, UKRD now own just over 50% of TLRC, and...
GET CMU MUSIC NEWS IN YOUR INBOX EVERY DAY: Click here to sign up to the CMU Daily
