Restructuring Firm Takes Effective Control of U.K. Entertainment Retailer HMV

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Hilco a couple of years ago also acquired HMV Canada and has cut down its locations and reshaped its store offerings.

LONDON -- Restructuring specialist and private equity firm Hilco has effectively taken control of struggling British music, DVD and video game retailer HMV. 

Hilco, which a couple of years ago acquired HMV Canada, has bought the company's estimated $275 million in debt from creditors Lloyds and Royal Bank of Scotland. It is believed that it acquired the debt at a discount due to the company's financial struggles.

The deal will allow it to influence the company's future as it reviews its financial and strategic options.

Music labels, led by Universal Music Group, and film studios have been believed to be supporting a buyout of the retailer by Hilco.

Last week, HMV, the last remaining big entertainment retailer in the U.K., went into administration in a process similar to a U.S. filing for Chapter 11 bankruptcy protection. HMV named Deloitte as its administrator to help it find a buyer or restructure to get rid of its debt. It has struggled amid a rise in digital entertainment options and cheap DVDs sold by big supermarket chains.

Deloitte said in a statement that it was working closely with Hilco as the companies "continue to seek a positive outcome for the business," which includes 223 U.K. stores and a staff of about 4,000.

Hilco confirmed that it has acquired HMV's debt. "It has not bought the business itself," the firm said. "Hilco believes there to be a viable underlying HMV business and will now be working closely with Deloitte who, as administrators, are reviewing the business to determine future options."

Hilco has owned HMV Canada since 2011. The BBC suggested this history could mean that suppliers are likely to give the Hilco-owned HMV U.K. business better credit terms.

HMV Canada knows well the challenges facing HMV in Britain.

Hilco originally bought its 121 outlets and then chopped that store-count down to 113.

HMV Canada president Nick Williams insists a shift from video games and tablet technology to higher-margin entertainment merchandise like superhero T-shirts and coffee mugs has helped the Canadian group survive the decline in packaged music and DVD sales.
"We generally believe this is an area that has life in it for a number of years yet," Williams told the Canadian Press in a recent interview. "We've gone after a significantly different business model" than the U.K. stores, he added.

Etan Vlessing in Toronto contributed to this report.


Twitter: @georgszalai