HMV suppliers are set to agree to slash upfront payments for CDs to help boost the troubled retailer’s cashflows as the possibility of pulling off a rights issue fades.
Record company giants Sony, Universal, EMI and Warner Music are in discussions with HMV, which last week issues its third profit warning this year, to let the retailer take some of their stock on a sale-or-return basis.
Normally HMV would spend millions of pounds in advance to keep its shelves stocked.
HMV remains a crucial route to market for the record companies, and the deal could see the retailer save £15m. Analysts estimate that HMV has £60m tied up in stock, according to the Sunday Times.
The move would help discussions with its lenders over future funding as HMV would be able to cut its working capital requirement.
However, hopes of conducting a rights issue are fading, according to the Observer which reported that advisers to HMV have told chief executive Simon Fox that it would be difficult to achieve because of worries about the group’s long-term future.
The four music groups are preparing to offer a similar model to the one being pushed by Tesco, which wants to be as little as 50p upfront for a new CD, according to the Sunday Times.
HMV is still conducting discussions with Russian Oligarch Alexander Mamut about acquiring the group’s book chain Waterstone’s. Mamut owns 6% of HMV’s shares.
It is also looking at hiving off its Canadian busines, as revealed by Retail Week.