Hilco Moves On HMV

Retail restructuring group Hilco has acquired £176 million of HMV’s debts from Lloyds Bank and Royal Bank of Scotland, effectively giving it control of the former high street giant.

Although it doesn’t mean Hilco has acquired HMV, which last week went into administration, it does mean that the 238-shop chain will likely remain in business.

Hilco, which last year acquired HMV’s Canadian business, has been in pole position to snap up the CD and DVD retailer since being appointed to advise HMV administrator Deloitte.

It is understood to have advised Deloitte to keep the HMV business running through the administration process.

Apart from Hilco, HMV had been sought after by about 50 potential suitors, which included trade buyers and private equity groups as well. Game Retail, the entertainment retailer which was purchased by OpCapita, expressed interest to acquire 45 HMV stores.

Other interested parties included Better Capital, the buyout group run by private equity veteran Jon Moulton; Endless, an investment firm focusing on distressed companies; and Peter Dubens, whose Oakley Capital owns part of Time Out.

HMV’s administration had put 4,000-plus jobs at risk, with its banks and suppliers refusing to bail out the sinking chain.

Initially, HMV’s administrators refused to honour gift cards but on Jan. 22 Deloitte announced that HMV gift cards and vouchers would be accepted, to the relief of customers who ran a high-profile campaign protesting the administrator’s decision.

Hilco’s intervention will be good news for the major record labels, which had agreed to put together a rescue package to prevent HMV from going out of business.

Universal Music, Warner Music and Sony were set to cut the price of CDs and DVDs and give the beleaguered high street retailer even more generous payment terms.

Film studios including 20th Century Fox, Universal and Warner were also reportedly backing the rescue effort.

Although HMV was in such deep financial trouble, having called in the administrators Jan. 14 because it couldn’t meet its banking covenants, the 239-shop chain still held about a fifth of the UK’s CD and DVD market.

The record labels and film studios were keen to avoid being left at the mercy of the knock-down pricing policies of the big supermarkets, such as Tesco, and the online players such as Amazon and iTunes.

Deloitte had also approached property agents CBRE and Savills to look at the possibility of hiving off some of HMV’s most valuable stores in a bid to raise funds.

Savills was expected to advise on the possibilities of 150 Oxford Street, HMV’s flagship store and the biggest music store in the world, while CBRE would  work on the remaining 238 stores.