TROUBLED music retailer HMV was yesterday preparing a presentation to its bank lenders due early next week as it works to resolve an impending breach of a loan covenant.
HMV is meeting the banks on a weekly basis as it attempts to renegotiate terms of a £240m loan facility and is taking debt advice from consultancies KPMG and Deloitte, sources told City A.M.
Banks including Lloyds and RBS extended the debt facility but HMV is expected to breach the covenant, which specifies that its earnings before interest, taxes, depreciation and amortisation must be higher than its rent bill, when it comes due in April. Its shares closed 4.6 per cent up at 11.5p, bucking the FTSE trend.
HMV is three years into a digital strategy that has seen it take a 50 per cent stake in 7digital, a digital download system that will be loaded onto all new BlackBerry smartphones and tablets. It also operates digital download site HMV Digital to offset the move away from high street stores.
In January, chief executive Simon Fox admitted it does not expect to meet several covenants tested against its full-year results out in June.