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HMV administration leaves Universal facing multi-million bill HMV administration leaves Universal facing multi-million bill
(about 1 hour later)
Music company Universal could be faced with a bill running to tens of millions of pounds in rent liabilities and a write-off in funding if HMV is shut down and its stores are not re-let.Music company Universal could be faced with a bill running to tens of millions of pounds in rent liabilities and a write-off in funding if HMV is shut down and its stores are not re-let.
Universal Music, which along with a number of other suppliers has provided a total of perhaps more than £40m to prop up HMV's beleaguered business, is also understood to liable for the rent on 16 of the DVD and music retailer's UK stores, which number about 240.Universal Music, which along with a number of other suppliers has provided a total of perhaps more than £40m to prop up HMV's beleaguered business, is also understood to liable for the rent on 16 of the DVD and music retailer's UK stores, which number about 240.
The music company took on the rental liability – which is understood to cover 14 UK stores and two in the US – as part of its £1.2bn acquisition of EMI Music last year.The music company took on the rental liability – which is understood to cover 14 UK stores and two in the US – as part of its £1.2bn acquisition of EMI Music last year.
EMI guaranteed rental agreements on a number of HMV stores when the retailer was spun-off from the record label in 1998. Universal assumed these guarantees when it acquired EMI.EMI guaranteed rental agreements on a number of HMV stores when the retailer was spun-off from the record label in 1998. Universal assumed these guarantees when it acquired EMI.
Universal Music will be liable for the rental bill on the 16 properties if HMV's administrators Deloitte, appointed on Monday, fail to find a buyer and the stores are not re-let.Universal Music will be liable for the rental bill on the 16 properties if HMV's administrators Deloitte, appointed on Monday, fail to find a buyer and the stores are not re-let.
"We are working with HMV and the administrators during these difficult times," said a spokeswoman for Universal Music."We are working with HMV and the administrators during these difficult times," said a spokeswoman for Universal Music.
In 2011, Hilco UK, the British-based restructuring specialist, paid $3.2m (£1.98m) to save the 121-strong HMV Canada chain.In 2011, Hilco UK, the British-based restructuring specialist, paid $3.2m (£1.98m) to save the 121-strong HMV Canada chain.
It is not known exactly how much Universal Music's potential bill might be. One music industry source said that a £150m figure covering 40 stores which was reported last year is wholly inaccurate.It is not known exactly how much Universal Music's potential bill might be. One music industry source said that a £150m figure covering 40 stores which was reported last year is wholly inaccurate.
Universal was one of a number of suppliers – including Warner Bros, Sony Music, Disney and Universal Pictures – that struck a deal last January to prop up HMV.Universal was one of a number of suppliers – including Warner Bros, Sony Music, Disney and Universal Pictures – that struck a deal last January to prop up HMV.
HMV handed the suppliers a equity stake of up to 5% in the form of warrants.HMV handed the suppliers a equity stake of up to 5% in the form of warrants.
In return the suppliers provided greater access to their music, TV and film back catalogues and offered HMV stock on consignment, meaning the retailer only paid for products if it sold them.In return the suppliers provided greater access to their music, TV and film back catalogues and offered HMV stock on consignment, meaning the retailer only paid for products if it sold them.
In August, HMV reported its financial results for the year to 28 April and revealed that the strategic alliance with suppliers had benefited its bottom line to the tune of £15m.In August, HMV reported its financial results for the year to 28 April and revealed that the strategic alliance with suppliers had benefited its bottom line to the tune of £15m.
HMV owns a total of 247 stores. There are 230 in the UK & Ireland and a further eight internationally, six in Hong Kong and two in Singapore. The retailer also wholly owns another nine stores which carry the Fopp brand, the independent retailer that was acquired by HMV after it went into administration in 2007.
HMV employs about 4,550 staff.
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