Good news at last for HMV, as its banks have agreed to support the troubled retailer.
The Group’s future has been in doubt for over 12 months, with the entertainment giant forced to sell its Waterstone’s and HMV Canada businesses.
And its position wasn’t helped by yet another difficult Christmas for the movie, music and games industry.
But HMV has enjoyed huge support from its music and movie suppliers, which has reassured the firm’s lenders that the retailer is a going concern.
HMV’s banking syndicate has amended the covenant package on its borrowings. The banks have agreed to waive HMV’s January covenant test and will re-test the group with more ‘headroom’.
HMV now believes that, should current trading conditions continue, it can reduce its debt by 50 per cent over the next three years. And that does not include the sale of HMV Live, which could still happen.
The firm says its debt will be £175-180m by the end of its financial year (April 30th 2012) and will report a loss of £10m for the full year.
But this is good news for the retailer, as it should secure its future for the next few years. Not to mention improve the company’s cash-flow situation.
"Today's announcement is enormously welcome,” said HMV chief Simon Fox.
“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 merchandising of music and DVD whilst also continuing to grow our sales in portable technology and further developing our online and digital offers."
Universal Music UK CEO David Joseph 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."