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HMV issues new profit warning

By | Published on Tuesday 5 April 2011


HMV has issued its third profit warning so far this year, but on the up side has announced that its bankers will not now apply financial tests linked to their bank loans until 2 Jul, rather than doing so at the end of this month as originally planned. It’s widely assumed that if loan covenant tests were indeed undertaken on 30 Apr the company would fail them.

As previously reported, HMV bosses issued a profit warning and announced a store closure programme at the start of the year following disappointing pre-Christmas sales, especially in the HMV chain. Since then intense negotiations have been ongoing with the firm’s bankers regarding the terms of its £130 million in debts.

The company has more recently admitted it is considering selling off both the Waterstones chain and its Canadian arm in a bid to raise quick money so to meet loan terms. Presumably the two month extension on applying those loan tests is in part to allow any such sales to get underway.

Although admitting that trading conditions remained “difficult” and that end of year profits were now more likely to be in the region of £30 million rather than the previous estimate of £38 million, HMV stressed its money lenders remained supportive, credit facilities were still open, and talks regarding restructuring debts were ongoing.