HMV is to meet with banks this week to outline a rescue plan that could include a sale of its book chain Waterstone’s.

HMV’s lenders have told the retailer that it needs to raise £75m in new funds in order for its lending covenants to be relaxed. In January HMV said it was in danger of breaching its covenants.

Waterstone’s founder Tim Waterstone and HMV shareholder Alexander Mamut, the Russian oligarch, are two potential bidders for the chain.

Other options HMV is looking at include a rights issue and more store closures.

HMV shares surged last week after chief executive Simon Fox remained upbeat on the entertainment retailer’s future.

Speaking at the Retail Week Conference on Thursday Fox said talks with HMV’s banks are “very positive”, adding that he is very confident the talks will end satisfactorily.

The retailer has issued two profit warnings this year as well as plans to close 60 stores after a disastrous Christmas.

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