DealBook: Hilco Takes Control of Music Retailer HMV

Philippe Lopez/Agence France-Presse — Getty ImagesStudents listen to CDs in a HMV store in Hong Kong.

12:04 p.m. | Updated

LONDON – The private equity firm Hilco Consumer Capital has bought the debt of the struggling British music retail chain HMV, according to three people with direct knowledge of the matter.

The debt deal gives Hilco effective control over HMV, which entered into administration, a form of bankruptcy, last week. The music retailer, with its well-known trademark of a dog next to a gramophone, has been hurt by weak consumer spending in its British home market.

HMV had outstanding debt of $279 million on Oct. 27, the latest figures available, although Hilco is understood to have paid around $190 million to purchase the debt.

Hilco was appointed on Monday as an adviser to the accountancy firm Deloitte, which is overseeing HMV’s restructuring, and bought the company’s outstanding debt from a consortium of banks led by Royal Bank of Scotland and the Lloyds Banking Group, the people said, who spoke on the condition of anonymity because they were not authorized to speak publicly.

Hilco has a track record of acquiring struggling retail brands. In 2009, it bought the assets of Polaroid for $85.9 million in cash and equity, and it acquired the brand name and logos of the home-furnishings chain Linens ‘n Things for $1 million.

Peter Macdiarmid/Getty ImagesHMV, whose name stands for His Master’s Voice, uses a dog next to a gramophone as its trademark.

The firm also picked up HMV’s Canadian operations in 2011 for $3.3 million, and already has relationships with many of HMV’s suppliers. Hilco is expected to decide within the next month about the future of HMV’s 240 stores across Britain, Ireland, Singapore and Hong Kong, according to one of the people with direct knowledge of the matter.

The deal is the latest stage in the history of the British music retail chain, which can date its origins back to the early 20th century. HMV, whose name stands for His Master’s Voice, opened stores across North America in the 1980s, but eventually closed its final outlet in New York in the early 2000s.

As consumers have increasingly bought music and movies from online retailers like Amazon.com and Apple’s iTunes, HMV and other retailers have struggled to match their rivals on cost. Last week, the British division of the entertainment retailer Blockbuster also entered administration, which is equivalent to Chapter 11 bankruptcy in the United States.

Article source: http://dealbook.nytimes.com/2013/01/22/hilco-takes-control-of-music-retailer-hmv/?partner=rss&emc=rss