UK retailer HMV has entered administration after a request for £300 million in funding was refused by suppliers. Financial firm Deloitte has been appointed as administrator – it also handled electrical retailer Comet’s administration, which resulted in the loss of 6,600 jobs.
HMV’s administration puts more than 4000 jobs at risk, though in a recently issued statement the retailer said that it intended to continue trading while a buyer is sought. The company’s shares have also now been suspended from trading on the London Stock Exchange.
“On 13 December 2012, the Company announced that as a result of current market trading conditions, the Company faced material uncertainties and that it was probable that the Group would not comply with its banking covenants at the end of January 2013,” the statement reads. “The Company also stated that it was in discussions with its banks.
“Since that date, the Company has continued the discussions with its banks and other key stakeholders to remedy the imminent covenant breach. However, 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.
“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.”
UK videogame retailer Game also entered administration last year, but was saved when Baker Acquisitions stepped in to rescue the ailing company. That resulted in 333 of 600 stores being saved, along with their associated jobs, and the rebranding of GameStation stores to Game.
If HMV can find a buyer, then a similar rescue package may be possible, though the operation would likely require a drastic overhaul as it has struggled for some time now against the migration from retail to online shopping. The HMV Group also owns CD and DVD retailer Fopp and book retailer Waterstones. It is as yet unclear how HMV’s administration will affect these brands.
“It has been a long time coming, but everyone has known that the writing was on the wall since the day someone first downloaded a digital song, Neil Saunders, managing director of retail consultancy firm Conlumino told the FT.
“People will be very sad to see it go because it is a very emotionally connected brand, which most of us have used and have a lot of resonance with. But the truth is it is just not a part of our purchasing habits as much as it used to be.”