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Wall Street fund looking to force control over HMV

By | Published on Monday 17 December 2012


Is New York-based investment outfit Apollo Global Management – which owns the CKX company and therefore the ‘Idol’ franchise and most of Elvis Presley Enterprises – planning to seize control of flagging music retail firm HMV?

Well, the Sunday Times was busy speculating about Apollo’s interest in the HMV company yesterday following news that the Wall Street company had bought £20 million of the retail firm’s debts from the Allied Irish Bank.

It’s the first time one of HMV’s moneylenders has sold on some of its debts, and came as the entertainment company last week admitted that it was set to break banking covenants in January, and was now busy negotiating with bankers to try and avoid the worse case scenario of failing to meet performance targets in its loan agreements, which would force the business into administration.

After a spike early last week, HMV’s share price tumbled to 2.37p following the company’s latest financial statement, that also confirmed the retailer was currently posting a loss of £37.3 million for the first half of the current financial year. That gives the company a market capitalisation of just over £10 million, compared to £1 billion when it first floated on the London Stock Exchange a decade ago.

Apollo, which was linked to a bid for EMI in early 2011, now controls about 10% of HMV’s debts, and the Times says it is looking to acquire more, possibly putting it in a position to force control of the retailer if and when covenant tests are failed in January and April. Quite what Apollo would want with HMV isn’t clear, though the brand clearly has some value if it could be separated from its high street liabilities.

There were rumours last week that HMV could go into administration this side of Christmas, or at least announce the closure of some of its stores, though management insist neither are currently on the agenda. But, assuming the company makes it into 2013, January is going to be make or break once again, and with the likes of Apollo now in the frame, it may not be current management who ultimately decide the entertainment retailer’s immediate future.

New speculation about the collapse of HMV comes as electronics retailer Comet shuts the doors on its retail chain for the final time, having gone into administration last month. Hopes that a deal could be struck with an unnamed buyer to keep 140 Comet stores open now seem dashed, with administrators instead hoping that a sale of the brand and its online business will bring in some money for creditors.