Struggling entertainment retailer HMV is being eyed for a takeover by Apollo Global Management, one of the world’s largest investment groups.

The group – which acquired Aurum, the parent company of Goldsmiths, Mappin & Webb and Watches of Switzerland at the beginning of the month – bought 10% of HMV’s debt from Allied Irish Banks last week. It is a move that some are predicting could signal a takeover.

On Thursday, HMV warned it is “probable” it will breach its banking covenants in the new year. A breach would put the retailer at the mercy of its lenders, which now include Apollo, reported The Daily Telegraph.

But, if this is the case, Apollo may need to buy more of the retailer’s discounted debt and it is believed that last week’s deal could be the first in a series in coming weeks.

It is understood that, although HMV is valued at just £10m on the stock market, buying its debt could be a cheaper way of acquiring the company.

HMV has struggled in recent years as the rise of internet downloads across films and music has weakened sales of CDs and DVDs.

Both parties declined to comment.