Cash-strapped HMV is bailed out by suppliers

The loss-making group, which owns around 250 stores in the UK, said it had signed better terms with key suppliers in a move which will ultimately help it shed around half of its £180 million debt pile over the next three years.

The deal is a sign that the music and film industry is willing to support high street retailers at a time when online shops provide intense competition and internet piracy damages trade.

The agreement was enough to persuade the banks – including taxpayer-backed Lloyds Banking Group – to amend existing loan agreements, giving the struggling group more financial headroom. Shares more than doubled following the announcement.

David Joseph, chairman of Universal Music in the UK, said: “HMV is a vital part of the UK music industry and we are delighted that the support of the film studios and music companies is helping to secure its future.”

The firm said its suppliers will receive a 2.5 per cent stake in the business as part of a “change in the nature” of their relationship.

HMV and Lloyds both said they were unable to comment further on the specific details of the deal due to reasons of confidentiality.

But the retailer said the new arrangement will have a “materially positive impact” on profits and cash flow, which will lead to a 50 per cent reduction in net debt over the next three years.