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HMV plans to call in administrators from Deloitte today after failing to agree on new terms for its debt during crisis discussions with banks and suppliers over the weekend.
The 91-year-old UK entertainment retailer has struggled in the face of growing demand for digital downloads, and lenders couldn’t be convinced to offer it a new lifeline following continued poor sales over Christmas.
The move into administration puts some 4,300 jobs at risk. HMV said in a statement: "The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection and in the circumstances therefore intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect."
It’s expected that Nick Edwards, Neville Kahn and Rob Harding of Deloitte will be appointed as administrators, and analysts expect them to find a taker for at least part of the company. Restructuring firm Hilco, which bought HMV Canada from its UK parent in 2011, is rumoured to be considering buying the group out of administration, the Guardian reports.
A spokesperson for HMV said it hopes to keep all 239 of its UK stores open, although the company is no longer accepting or issuing gift vouchers.
"We want the business to continue as a going concern and fashion a future for ourselves - whether that's through finding a new buyer or other means - and the best way for us to do that is still trade with all our stores open," HMV’s Gennaro Castaldo told CVG.
Neil Saunders, managing director of the research house Conlumino, said HMV’s fall into administration “was always inevitable” due to structural failures. “In the digital era where 73.4 per cent of music and film are downloaded or bought online, HMV's business model has simply become increasingly irrelevant and unsustainable.
"HMV did not react early enough to the digital trend; it did not give shoppers a reason to keep buying from it. Admittedly, the company has tried to innovate through selling more electricals and gadgets but, unfortunately, these initiatives were never going to be enough to counteract the terminal decline in its core business."
Specialist UK games retailer GAME went into administration last March. Administrators from PwC quickly announced the closure of 277 stores, resulting in the loss of over 2,000 jobs. Thankfully the company was bought out of administration by OpCapita in early April, saving more than half of its pre-administration store portfolio and staff.