News

Credit insurers reviewing cover to HMV Group

HMV Group has confirmed that credit insurers are reviewing the level of cover provided to suppliers to the retailer. The development, which reports suggest is impacting CD and DVD suppliers, follows poor Christmas sales at the HMV chain and fears that the HMV Group will breach its banking covenants in April. A spokesperson for Random House said this morning that it was trading with Waterstone's under its "normal terms".

The HMV statement follows press reports last night sparked by an item by BBC business editor Robert Peston. He said two music and entertainment companies could no longer get credit insurance for HMV. According to a leaked email, Peston said insurance companies were concerned the banking convenants would not be met, in the light of HMV Group's recent results. HMV said two weeks ago that it was closing 60 stores, including 20 at Waterstone's, in order to ensure it met its banking requirements.

However, according to the Guardian, one credit insurance firm removed cover to goods supplied to HMV Group on 12th January. The insurance would cover any unpaid bills should the business cease trading.

In the statement issued this morning, HMV Group said: "Following the peak trading period, credit insurers are reviewing the level of cover they provide on the Group.

"Whilst this has resulted in the reduction in the availability of credit insurance to certain of the company's suppliers, our business remains a core channel to market for them. We continue to maintain excellent relations with our suppliers and have had no difficulty in obtaining stock."

A spokesperson for Waterstone's said it had no further comment to make beyond the HMV statement.

Analysts have suggested that suppliers would continue to trade with HMV even if credit insurance was withdrawn, citing the group's  position as the 'last man standing' on the high street. Topps Tiles temporarily had insurance removed two years ago and continued to trade, analysts said.

Comments: Scroll down for the latest comments and to have your say

By posting on this website you agree to the Bookseller comments policy. Comments go direct to live please be relevant, brief and definitely not abusive. Report any "unsuitable comments by clicking the links"

The leaked email says "all HMV entities".

are they using entities as meaning - fiction?

The word 'entities' is ambiguous and as Robert Peston makes clear was sent by a supplier of DVDs and CDs. Sky says the leaked email came from Sony's CD manufacturing arm, DADC. The Telegraph raises the game slightly, indicating that "certain CD and DVD distributors" have been affected. The HMV Group statement makes it plain that the "group" as a whole is under review, and we should stress the word 'review' at this point, but there are no reports that book distributors have been impacted. If the situation changes we'll report it.

Sad though it is, it seems like the days of selling physical media on the high street are fast coming to an end.

As several people have reminded us, HMV is still set to make a tidy sum this year. But what matters is that a growing number of people no longer have confidence in the businesss and I would suggest that the company has gone well past the tipping point. It's not Simon Fox's fault. The writing was on the wall years ago, when HMV failed to build a strong online presence. By the time Fox took over in 2006, it was too late to catch up. The demise of Zaavi (such a great brand that I can't even remember how to spell it) and Woolworths led some to make the mistake of thinking that Fox's turnaround plan was working. Now we know better. The obvious thing to do is sell Waterstone's, but why let go of the most successul part of the group? It's a dilemma.

Suppliers take out credit insurance to cover payments owed to them by customers.

So when insurance companies lower their credit limits, they are concerned about the ability of the supplier's customers, in this case HMV, to pay their debts.

This is a nightmare for Waterstones . I have endured credit insurers at both Dillons and at Bertrams [this was years ago incidentally]. At Bertrams they rang on a Friday at 5pm to tell us that credit was being reduced on the Monday . Publishers always then panic and life becomes intollerable particularly with the big 3rd party distributors .
I can't see why publishers spend their money on such insurers they rarely offer a good cover to premium , and rarely insure what needs to be insured. It is only the few pence a copy production cost that is the TRUE loss to the publisher afterall, not the gross revenue .Trade uninsured and have some fun !. i

Where were the warning flags from the credit insurers re BBS ?

Still want to trade for fun Julian??? HMV calls in KPMG to help tackle debt pile. http://www.thisismoney.co.uk/markets/article.html?in_article_id=521504&i...

Hmm.... alot of Waterstone's stories have seemed to have dissapeared since Tuesday... is this a re-run of the infamous blocking of The Bookseller in Waterstone's stores?

The leaked email says "all HMV entities".

are they using entities as meaning - fiction?

The word 'entities' is ambiguous and as Robert Peston makes clear was sent by a supplier of DVDs and CDs. Sky says the leaked email came from Sony's CD manufacturing arm, DADC. The Telegraph raises the game slightly, indicating that "certain CD and DVD distributors" have been affected. The HMV Group statement makes it plain that the "group" as a whole is under review, and we should stress the word 'review' at this point, but there are no reports that book distributors have been impacted. If the situation changes we'll report it.

Sad though it is, it seems like the days of selling physical media on the high street are fast coming to an end.

As several people have reminded us, HMV is still set to make a tidy sum this year. But what matters is that a growing number of people no longer have confidence in the businesss and I would suggest that the company has gone well past the tipping point. It's not Simon Fox's fault. The writing was on the wall years ago, when HMV failed to build a strong online presence. By the time Fox took over in 2006, it was too late to catch up. The demise of Zaavi (such a great brand that I can't even remember how to spell it) and Woolworths led some to make the mistake of thinking that Fox's turnaround plan was working. Now we know better. The obvious thing to do is sell Waterstone's, but why let go of the most successul part of the group? It's a dilemma.

Suppliers take out credit insurance to cover payments owed to them by customers.

So when insurance companies lower their credit limits, they are concerned about the ability of the supplier's customers, in this case HMV, to pay their debts.

This is a nightmare for Waterstones . I have endured credit insurers at both Dillons and at Bertrams [this was years ago incidentally]. At Bertrams they rang on a Friday at 5pm to tell us that credit was being reduced on the Monday . Publishers always then panic and life becomes intollerable particularly with the big 3rd party distributors .
I can't see why publishers spend their money on such insurers they rarely offer a good cover to premium , and rarely insure what needs to be insured. It is only the few pence a copy production cost that is the TRUE loss to the publisher afterall, not the gross revenue .Trade uninsured and have some fun !. i

Where were the warning flags from the credit insurers re BBS ?

Still want to trade for fun Julian??? HMV calls in KPMG to help tackle debt pile. http://www.thisismoney.co.uk/markets/article.html?in_article_id=521504&i...

Hmm.... alot of Waterstone's stories have seemed to have dissapeared since Tuesday... is this a re-run of the infamous blocking of The Bookseller in Waterstone's stores?