HMV may be off deathwatch, as £220m cash injection agreed

Music and DVD retailer HMV has agreed an "eye-watering" £220m refinancing package with its lenders.

08.06.11

HMV has agreed a new refinancing deal. This package will ease the stress on the troubled retailer, but it now faces high interest rates and fees as part of its repayment plan. The company has estimated debts of £170m, and according to BBC News, HMV has issued several profit warnings this year, with the planned closure of 60 stores.

The new package includes separate loans of £70m and £90m, with a £60m credit facility that can be called on if needed. With the taxpayer-funded Royal Bank Of Scotland and the Lloyds Banking Group as the main lenders, HMV faces an interest rate of 4% above the benchmark market rate and a fee on the £90m loan when it is repaid. The interest rate will rise to an estimated 14% if it has not been repaid by the company by January 2013. Ouch.

The deal pushed HMV’s share price up 4p to 12.25p. It has rose further yesterday, although later fell again when the stringent conditions of the package became clear. Robert Clark, senior partner at Retail Knowledge Bank, said the interest rates HMV potentially faced on this loan were “eye-watering”.