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Credit insurers reviewing cover to HMV Group
19.01.11 | Graeme Neill
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Analysts have suggested that suppliers would continue to trade with HMV even if credit insurance was withdrawn, citing the group's position as the 'last man standing' on the high street.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.