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Tuesday, 26 April 2011

HMV considering a CVA

Reports over the weekend have indicated that HMV is looking at the possibility of a company voluntary arrangement or CVA to save the business.  Last month Simon Fox, HMV's chief executive, said at a retail industry conference that a CVA was "not an option".



In a statement HMV said: "As is entirely usual and appropriate in current circumstances, the group continues to keep itself fully informed on all of its available options and keeps its contingency plans up to date, among which a CVA may or may not be considered."  KPMG are advising the firm having pushed through the JJB Sports CVA.

It is understood that Alexander Mamut, a Russian oligarch, is reportedly close to buying the Waterstone's book chain in a £35m deal.

We keep reading statements in the press about the process being "controversial" and it allows companies to "stop paying rent on their shops"

These are, of course, generalizations.  In a CVA the landlords will still receive a dividend on the amount they are owed and if the business continues to trade they may have to agree to a reduced rent.  It all depends on how the CVA is constructed.  Landlord's support is usually crucial to any CVA being approved for a retailer but failure to support one will often result in the business going into administration if their financial situation deteriorates.  Administration is likely to have the same result in that shops are likely to be closed, especially if no buyer for the business can be found.

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