HMV's Irish arm may be liable for UK debt
HMV’s Irish operation is potentially liable for the debt that triggered its British parent’s collapse last week, which could see the UK banks rank ahead of Irish creditors.
David Carson of Deloitte in Dublin was appointed receiver to the Irish business on Wednesday. It followed the appointment of Deloitte as administrators to British-based parent, HMV Group plc.
While the Irish outlets were shut, sparking protests from staff, the British shops are still trading. The administrators hope to sell the business as a going concern.
Retail restructuring specialist Hilco was yesterday reported to be the front runner of 50 possible suitors, while it was also claimed that record labels and film studios, such as Universal and Warner, were prepared to back a rescue bid with generous credit terms and discounts.
The group’s last annual report states that its Irish subsidiaries, Rustico and HMV Ireland Ltd, are guarantors of a £220 million credit facility agreed with its banks in April last year.
HMV Group’s inability to make a £30 million repayment against the debt, which was due this month, was one of the triggers for its collapse last week.
Under last April’s loan agreement, a number of its subsidiaries guaranteed the parent’s liability, including the Irish companies, and their assets were pledged as part of the overall security.
The guarantee means that if HMV Group, which is now insolvent, cannot pay its debts, the liability falls on the subsidiaries, including the Irish business, and the banks can take control of whatever assets they have.
It also means that if the Irish companies are liquidated, any claims made by the banks who provided credit to the parent group would take precedence over those made by most other creditors.
The company’s 300 Irish staff have been given assurances by the receivers that they will be paid after they ended their sit-ins at HMV shops in Limerick, Cork and Dublin.
The protests ended at about 3pm on Saturday after talks with Deloitte. Staff say they were given a letter signed by Deloitte saying they would be paid their money on Friday.
Deloitte would not confirm a letter with such terms had been given to staff.
“It was through us doing the sit-in that we got this letter. Now we are thrilled that 300 people are going to be paid in full,” Emer Walsh, a supervisor in Limerick who was involved in the sit-in, told Live 95FM.
Joe Higgins, Socialist Party TD, said staff had been forced to end their protest or risk jeopardising wages due to all 300 workers. “I condemn Deloitte for their treatment of the HMV workers,” said Mr Higgins in a statement. “Massive pressure was applied on the workers occupying the stores in Limerick, Cork and Tallaght to the effect that if they did not end the occupation by 3pm today they and all their colleagues in the stores where no occupation was taking place would not receive the wages and overtime due from the company,” he said.
Workers said they were confident they would get their wages and overtime for December and January.
One worker, who did not want to be named, said there was anger at how the issue was handled. “After years of loyal service, we had to hold sit-ins so we could get paid.”