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Unsecured creditors will see nothing from HMV administration

By | Published on Wednesday 21 August 2013

HMV

Money lenders to the old HMV Group plc have recovered £38.6 million after the sale of the flagging entertainment retailer to Hilco earlier this year, while financial and legal advisors to the defunct company will earn £15 million for their work. Unsecured creditors, including suppliers and landlords, will likely see nothing, while the old HMV pension fund will lose out on £26 million it was due.

HMV Group, of course, went into administration back in January. Hilco’s acquisition of the company was confirmed in April, and resulted in 140 of the entertainment retailer’s stores staying open and over 2600 jobs being saved. A report from administrator Deloitte says that that deal was worth £40.1 million, while other asset sales have seemingly raised something nearing another £14 million.

The banks which helped fund HMV’s ultimately unsuccessful diversification in the years before its collapse will take the lion’s share of that money, while Deloitte will also get £10 million for handling the administration. Lawyers Linklaters and property consultants Retail Agents 260 will also be paid over £2 million each.

In addition to the unsecured creditors, who will get nothing, according to the Daily Telegraph the old EMI music company is also listed as a secured creditor.

This likely relates to the fact that EMI, as a former owner of HMV, was the guarantor on some of the retailer’s leases. It’s not clear what happened to those liabilities when EMI was split up for sale by Citigroup, but who ever had them isn’t likely to see any pay out from the administration (though it’s likely said leases were taken over by Hilco or other third parties, so the liabilities may not have been realised).

As mentioned, the HMV pension fund – the beneficiaries of which are former employees from both HMV and its former subsidiary Waterstones – also loses out, though a spokesman for the fund said that this will not affect members of the pension scheme.

Chris Martin, of Independent Trustee Services Limited, a trustee of the HMV Pension Scheme, told the Telegraph: “The level of recovery for the pension scheme does not affect the benefits being paid to members as the Scheme is proceeding through a Pension Protection Fund assessment period. PPF pays set levels of compensation regardless of the amount of insolvency debt recovery so members are protected at that level. We are not aware of any factors that call in to question the Scheme’s eligibility for PPF compensation”.



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