Universal To Help With HMV Rents?

Having paid $1.9 billion for former parent company EMI, Universal is now understood to be liable for the rent on approximately 40 HMV stores.

The arrangement is a throwback to 1998, when EMI guaranteed rental agreements on some HMV stores when the retailer was spun out of the record label.

The Daily Telegraph reckons that Universal would have taken on the guarantees when it bought EMI’s recorded music business.

The worst-case scenario for Universal is HMV going into administration and finding it impossible to re-let the stores. The Telegraph estimates that would land Universal with a bill for around $240 million.

The major record companies are already supplying the troubled retailer on what amounts to a sale-or-return basis.
The arrangement highlights the close relationship between HMV and its suppliers, which are trying to support the retailer with a series of initiatives.

Having lost Woolworths, Zavvi, Music Zone and even Andy’s Records, the majors are desperate that another huge retail chain doesn’t bite the dust.

Heading into Christmas, which should be boom time for retailers such as HMV, the company – which has 238 UK shops – was warning of “material uncertainty” about its future because it can’t meet this month’s banking covenants.
It’s currently in talks with the eight banks that hold the company’s debt about cutting a new deal on the repayment terms.

Allied Irish Bank already appears nervous about HMV’s future and has sold a little more than 10 percent of the company’s debt for $32 million.

That went to Apollo Global Management, one of Wall Street’s biggest investment funds, which is reportedly keen to buy more of the ailing entertainment retailer’s debts.

If Apollo becomes HMV’s major creditor, it puts it in a good position to take the business as it teeters on the brink of collapse.

The other lenders are reportedly reluctant to sell their loans too cheaply and are still hopeful that HMV can survive without a takeover.

Despite hiving off MAMA Group assets for around $65 million, money that HMV had earmarked to cut its $260 million or so debt, the latest trading statement shows first-half losses for 2012 were close to $60 million.

The news led to HMV’s share price falling 39 percent to 2.4 pence. By close of trading Jan. 3, it had tumbled to 1.7 pence.