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 the 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 suffered from weak consumer spending in its home British market. HMV had outstanding debt of $279 million as of Oct. 27, the latest figures available, although Hilco is understood to have paid less 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 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 f acquiring struggling retail brands. In 2009, the private equity firm bought the assets of Polaroid for $85.9 million in cash and equity and acquired the brand name and logos of Linens ‘n Things, the home-furnishings chain, for $1 million.
The private equity firm also picked up HMV’s Canadian operations in 2011 for $3.3 million, and already has relationships with many of the British company’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 1980’s, but eventually closed its last outlet in New York in the early 2000’s.
As consumers have increasingly bought music and movies from onli! ne 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.
