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[File photo] Tim Ireland/PA Wire
HMV

Banks and UK taxpayer take stakes in HMV as part of rescue package

The British-owned entertainment chain secures a €250m lifeline to stay alive, but the deal comes at a cost.

STRUGGLING HOME ENTERTAINMENT retail chain HMV has agreed a new rescue package with its lenders, who have refinanced loans worth €250m.

In return, the Royal Bank of Scotland and Lloyds will take a 5 per cent stake in the company, which has debts of around €190m. The former lender is about 60 per cent owned by the British taxpayer, meaning the UK public now owns a stake in the chain.

While the deal confirms the short-term viability of the company, the interest rate being charged on its new loans is punitive – coming a full four per cent above the benchmark London inter-bank market rate.

FT.com said the refinancing package will be completed as soon as the £53m (€59.4m) sale of the Waterstone’s book chain, which is owned by HMV, is completed.

Shares in the chain rose by over 10 per cent on the news, giving the company a market capitalisation of £58.2 (€65.2m).

HMV has already issued four profit warnings this year alone, having struggled in recent years as online shopping for music, games and movies has come more convenient and better value for shoppers.

The Guardian suggests the deal gives HMV two years to get its sales back on track, with chief executive Simon Fox hoping to refocus its sales to electronic hardware, moving away from the music-and-software model which brought it to prominence.

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