HMV credit insurance under review

In a stock exchange announcement this morning, HMV said it wanted to clarify that “following the peak trading period, credit insurers are reviewing the level of cover they provide on the group”.

It said: “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.”

The announcement comes after the BBC revealed two music and entertainment companies said they can no longer get credit insurance to continue to supply the retailer. However HMV chief executive Simon Fox has told the BBC that HMV had not yet experienced any difficulty in obtaining stock.

HMV warned on profits at the beginning of the month after a poor Christmas trading period. It also said it was in danger of breaching its banking covenants and revealed it would close 60 shops across the group.

Last week it embarked on staff consultations at head office.

In an email seen by the BBC, the head of credit and collections of a “major” UK entertainment manufacturer and distributor said:

“Our credit insurers have significantly reduced our insured credit limit on all HMV entities. Based on the current HMV balances, the limit is not sufficient to support any sales on an insured basis moving forward.

“I have this morning met with the Chief Executive and Risk Director at the insurance company. They met with Simon Fox last week and whilst they have said that HMV has provided everything asked for, they are clearly worried following the public announcement that bank covenants may not be met. A further review will take place in 4 weeks time.”

The BBC said HMV chief executive Simon Fox was unaware that credit insurance had been scaled back. But Fox added that he wouldn’t necessarily know, because credit insurers deal with suppliers, not with HMV itself.