Against the backdrop of yet more evidence of slowing retail sales (May's figures show a fall of spending of 2.1% as compared with last year) HMV has been thrown a lifeline by its banks, Lloyds Banking Group and RBS. HMV has been rescued by a two year facility of £220m.
However, the terms are tough at 4% over market lending rates and the banks will next year have 5% of the shares in HMV having been issued with convertible warrants. Also shareholders will not be able to recieve any dividends until the first £90m of the debt is repaid. What is more the banks are insisting that monies from the sale of Waterstones should be used to pay down debt. In order to pay back the loan they are going to need to bring in some cash and quickly. Almost half the stores are going to convert to centres for the purchase of electronic tablets and related kit, apps, and downloadable entertainment. This conversion needs to be a success.
It is of course interesting to note that the taxpayer is in effect going to be a shareholder in a high street store!