The beleaguered UK entertainment retailer HMV Group has announced a “material improvement in its financial position”, following the news that its banking syndicate has agreed to amend the covenant package on HMV’s existing borrowings. This move on the part of the banks comes in response to a change in the nature of HMV’s relationships with its key music and film suppliers, which includes the intended grant of warrants representing 2.5% of its equity to these suppliers.
David Joseph, Chairman and CEO of Universal Music UK said, “HMV is a vital part of the UK music industry and we are delighted that the support of the film studios and music companies is helping to secure its future. We look forward to working closely with HMV in the years ahead.”
According to the official HMV statement, if current trading patterns continue, the Group now expects, on the basis of its current plans, to be able to reduce its debt by approximately 50% over the next three years. For the year to 30 April 2012, HMV expects net debt to be £175-180m and, in expectation of continuing challenging conditions, believes it is now likely to deliver a slightly larger loss of around £10m for the full year.
“Today’s announcement is enormously welcome,” Chief Executive Simon Fox (pictured) said at the time. “These developments represent a material improvement in our financial position relative to the statement we made at the time of our Interim results. The new relationship with our suppliers and the support of our banks will now enable HMV to wholeheartedly focus all of its energies - working in close partnership with its suppliers, on serving the changing needs of its customers ever more effectively.
"As a key part of this we remain committed to improving our specialist ranging and merchandizing of music and DVD whilst also continuing to grow our sales in portable technology and further developing our online and digital offers.”