hmv hears the music after striking £220m refinancing deal
Last Updated : GMT 09:40:38
Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle
Last Updated : GMT 09:40:38
Themuslimchronicle, themuslimchronicle

HMV hears the music after striking £220m refinancing deal

Themuslimchronicle, themuslimchronicle

Themuslimchronicle, themuslimchronicleHMV hears the music after striking £220m refinancing deal

London - Arabstoday

Entertainment retailer HMV Group has negotiated a £220 million (Dh1.32 billion) refinancing lifeline with its lenders, but analysts believe the onerous repayment terms could wipe out profitability for the next two to three years. HMV\'s shares, which have slumped 80 per cent in a year marred by profit warnings, covenant risks and increasing online competition, initially rallied by 10 per cent on Tuesday morning as the markets responded positively to the news. However, its shares closed down 14 per cent as the true costs of survival became apparent. A £90 million slice of HMV\'s debt known as ‘Facility B\' will be subject to hefty exit fees, costing up to 14 per cent of the outstanding loan amount unless it is repaid by January 2013. HMV confirmed that current trading is about 15 per cent behind the level of a year ago. This led analysts to believe early repayment is impossible, predicting that potential interest charges of £10 to £15 million a year will wipe out profits. \"There is no longer an immediate liquidity issue, but there is clearly a profitability issue on a three-year view,\" said Adam Cochrane, retail analyst at UBS. Complex transaction Describing the debt transaction as \"one of the more complex I\'ve seen in the retail sector\", he added: \"Sales continue to be weak, so it\'s likely HMV will incur some of these punitive interest charges, and that will probably eat away a large chunk of its profits. The return on capital expenditure will struggle to be greater than the cost of finance, suggesting the banks want to see further disposals.\" Dividend payments will be suspended while the £90 million facility remains outstanding — a further blow for HMV\'s shareholder base, which remains dominated by income funds. The final stage of the refinancing deal rests on shareholders voting through the £53 million sale of high-street book chain Waterstone\'s to Russian tycoon Alexander Mamut. On Tuesday evening, a circular was distributed to shareholders in advance of an extraordinary meeting on June 23. HMV\'s long-suffering chief executive Simon Fox said he was \"confident\" that shareholders would vote through the deal, but insisted that a rights issue or forced disposal of the group\'s live music division were both unlikely. \"The banks are not running the company,\" he said. \"HMV and the live division work extremely well together. I\'d be foolish to rule out [a rights issue] in the future, but to raise equity, one has to have an equity story.\" The disposal of HMV Canada is expected to conclude in the coming weeks, though this will only raise an additional £5 million. Falling sales Fox intends to spend £6 million converting a further 150 HMV stores by September, devoting one-quarter of the shop floor to music technology to stem falling sales of CDs and DVDs. A pilot in six stores showed a 150 per cent uplift in technology sales, he said, but analysts remained deeply sceptical of the strategy, questioning its impact on working capital. Andy Wade, retail analyst at Numis, forecast that working capital constraints coupled with declining profits would produce a negative free cash flow movement of £95 million for the financial year just ended. \"It remains to be seen how much support HMV\'s suppliers will give it after the refinancing is agreed,\" he said. \"Music suppliers have been very flexible in the past, as they have an interest in supporting HMV\'s survival. However, there will be a greater bias towards electrical products and games in the future, which could drag on working capital as the stock turns more slowly and credit terms are likely to be tighter.\" HMV\'s consortium of lenders, led by Lloyds Banking Group, will take warrants worth 5 per cent of the company\'s share capital under the terms of the refinancing. \"If like-for-like sales continue to run 15 per cent down, HMV will fall into loss this year and the bank warrants will be worthless,\" said Nick Bubb, retail analyst at Arden Partners.

themuslimchronicle
themuslimchronicle

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

hmv hears the music after striking £220m refinancing deal hmv hears the music after striking £220m refinancing deal

 



Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle

GMT 09:46 2017 Sunday ,27 August

Norway fines tourist guide for scaring polar bear

GMT 07:33 2018 Monday ,08 January

CIA chief denies agency role in Iran unrest

GMT 08:55 2017 Tuesday ,15 August

Shares of Fiat Chrysler surge

GMT 00:09 2017 Friday ,27 October

Alphabet quarterly profit climbs

GMT 09:53 2017 Saturday ,08 April

Mexico inflation hits new seven-year high

GMT 18:28 2012 Friday ,09 March

All balanchine

GMT 07:09 2015 Friday ,11 December

Syria government scrapes barrel

GMT 15:57 2017 Tuesday ,24 October

2018 Olympic torch ceremony hit by poor weather

GMT 03:22 2017 Wednesday ,02 August

At least 29 killed in Afghan Shiite mosque attack
Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle
 
 Themuslimchronicle Facebook,themuslimchronicle facebook  Themuslimchronicle Twitter,themuslimchronicle twitter Themuslimchronicle Rss,themuslimchronicle rss  Themuslimchronicle Youtube,themuslimchronicle youtube  Themuslimchronicle Youtube,themuslimchronicle youtube

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2023 ©

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2023 ©

muslimchronicle muslimchronicle muslimchronicle muslimchronicle
themuslimchronicle themuslimchronicle themuslimchronicle
themuslimchronicle
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
themuslimchronicle, themuslimchronicle, themuslimchronicle