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Hilco Takes Control Of HMV Debt

• 23rd Jan 2013

Restructuring specialist Hilco UK yesterday announced they had acquired HMV’s debts from Lloyds and the Royal Bank Of Scotland, effectively giving them control of the struggling entertainment retail company, although an actual buy out of the HMV Group is yet to take place.

Confirming its move to buy up HMV’s debt, the firm said in a statement: “Hilco UK confirms that it has acquired HMV’s debt from the Group’s lenders. It has not bought the business itself. Hilco believes there to be a viable underlying HMV business and will now be working closely with Deloitte who, as administrators, are reviewing the business to determine future options“

Hilco has bought or taken control of a number of failing UK high street retailers in recent years, including Borders, Habitat, Somerfield and Woolworths. Its involvement in such companies is often controversial, mainly because it has a reputation for asset stripping and winding down firms where current management, rightly or wrongly, believe there is a business to be saved. However, where Hilco believes more is to be gained by restructuring and rescuing its acquired companies, that’s a strategy it sometimes pursues – sometimes successfully – and indications suggest that is its plan for HMV UK.

The firm’s Canadian division bought HMV Canada in June 2011, and earlier this month reported an upward trend in revenues there for 2012. However, its successes in Canada have seemingly resulted from a programme of rebranding and diversifying away from music and more into DVDs, merchandise and headphones – a strategy HMV UK adopted long ago, and on which some blame its current predicament. Nevertheless, Hilco said in a statement yesterday that it considers HMV in the UK to still be a viable business.

As previously reported, execs at Universal Music, Warner Music, Sony Pictures and 20th Century Fox are thought to support Hilco taking over HMV, believing that its proposals to take ownership of the company are the most credible of the 50 or so reportedly on the table, and are most likely to ensure a decently sized and commercially viable HMV business emerges from the administration.

Various insiders say that this means the major distributors would be willing to offer particularly favourable terms and discounts (even more so than before) on stock while Hilco attempts to get HMV back on its feet. Though such plans are not without controversy, as such a move could have a negative effect on independent entertainment retailers who rarely enjoy the same special deals and discounts. And as it’s far from a given that offering HMV a leg up at this stage will actually save the business, the result could be to push more indie stores to the brink, just as those independent retailers become ever more crucial to the record industry long term.

via CMU:Daily