HMV has struggled with falling sales of CDs and DVDs Troubled music and DVD retailer HMV has agreed a new refinancing package with its lenders, worth £220m.
But the company faces high interest rates and fees as part of the new deal.
The deal includes issuing the lenders with warrants worth 5% of the company, which will be converted into shares next year.
In May it sold its Waterstone’s book chain for £53m to a fund controlled by Russian billionaire Alexander Mamut, who already owns 6% of HMV.
HMV has estimated debts of £170m and has issued several profit warnings this year.
The company’s share price rose 6% to 13p at the start of trading in London, following the announcement.
The group has faced increased competition from online retailers and supermarkets, and has seen sales of CDs and DVDs fall as a result, leading to the planned closure of 60 stores this year.
HMV’s main lenders are taxpayer-backed Royal Bank of Scotland and Lloyds Banking Group.
“HMV’s executives – led by chief executive Simon Fox – have little more than two years to get the business into shape”
But the new money will not come cheap – the interest rate payable is 4 percentage points above Libor, or the benchmark market rate.
The package is made up of separate £70m and £90m loans, and a £60m credit facility, which can be called upon if needed.
And the company faces an “exit fee” due on the £90m loan when it is repaid, which would rise to 14% by January 2013 if the loan has not been repaid by then.
Chief executive Simon Fox said the new bank facility “represents another important milestone in securing the financial stability of the group”.
BBC business editor Robert Peston said HMV’s executives had little more than two years to get the business into shape, “at the risk that the flame of this well-known retailer could yet be extinguished”.
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