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Hilco UK buys up HMV debt from Lloyds, RBS

23 Jan 2013

broken-cd_sqHilco UK, the retail restructuring specialist, has effectively taken control of HMV by buying up the stricken music retailer’s bank debt.

Reports on Tuesday confirmed the London-based firm, which already owns HMV Canada and has relationships with HMV’s suppliers, has bought bank debt owned by lenders Lloyds and Royal Bank of Scotland for about £40m.

HMV, which sank into administration last week, had underlying net debt of £176m as at the end of October, although this has since fallen to about £120m following Christmas and New Year trading.

Although Hilco has not acquired HMV as such, the firm can effectively take control of the company, while any rival bidder would need its approval.

Previous reports said Deloitte, HMV’s administrator, had received about 50 expressions of interest for the business, including one from Game, the retailer bought out of administration last year by turnaround group OpCapita.

Other interested parties are understood to include Leeds-based turnaround specialist Endless, Jon Moulton’s Better Capital, and private equity firm Oakley Capital, which owns part of Time Out.

HMV’s collapse is said to be the result of growing competition from supermarkets and internet retailers, whic impinged on profitability and made it difficult for the company to meet banking covenants due at the end of January.

Deloitte is keeping HMV’s 230 stores open while seeking a buyer for the company.

Reports in December said Apollo Global Management had bought a chunk of HMV’s loans in a bid to eventually seize control of the beleaguered British music retailer, although reports last week suggested the US buyout giant was not planning a takeover.

In its interim results in December HMV said it was likely to breach key loan agreements in January and April, which sent shares plummeting 39 per cent to 2.49p – valuing the company at just £10m.

The announcement also included news of a £37.3m first-half loss, which the company blamed on poor sales in the run-up to Christmas.

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