* KPMG to advise on HMV’s debt - source
* Record labels back HMV in letter to The Times
* Shares down 2.9 percent
(Adds detail, background, shares)
LONDON, Jan 20 (Reuters) - British music and books retailer HMV HMV.L has appointed accountancy firm KPMG [KPMG.UL] to advise on its debt and help it meet an April test of its borrowing rules, a source familiar with the situation said.
The source said on Thursday that KPMG, already an adviser to HMV, has been given the additional task of tackling the company’s debt, reported as 152 million pounds ($243 million) when it published half-year results in December. [ID:nLDE6B51I3]
That is more than the company’s market capitalisation of about 108 million pounds.
News of KPMG’s additional role came a day after HMV said credit insurers to some suppliers had reduced the cover they provide on the group, adding to worries about the long-term future of the group and sending its shares lower. [ID:nLDE70I0FN]
“We have received specialist debt advice for every year since the group was formed in 1998 and, given our recent statement on debt covenants, the company will continue to take this type of advice as prudently appropriate,” HMV said
KPMG declined to comment.
HMV issued a profit warning this month and said meeting April’s test of its borrowing rules would be tight. [ID:nLDE70409D] [ID:nLDE70I0FN]
It has said it plans to close or sell 60 British stores over the next 12 months and make a further 10 million pounds of savings across the group, which includes the Waterstone’s chain of bookshops.
Shares in HMV, which have lost 68 percent of their value over the past year, were down 2.9 percent at 24.75 pence at 0911 GMT, valuing the business at 108 million pounds.
The stock was worth around 140 pence two years ago.
But in a sign Britain’s music industry will rally round HMV in a way it failed to do so to prevent rivals Woolworths and Zavvi’s demise, seven leading music industry executives, including the heads of the four largest record labels, have written to The Times newspaper pledging to support HMV.
“It’s business as usual. We are continuing to supply HMV with our music and they are continuing to do much more than sell it,” wrote the signatories, which include the heads of Sony Music UK, Universal Music UK and Warner Music UK.
“HMV is at the heart of our industry, and they have the full support of all of us.”
Reporting by James Davey and Karolina Tagaris; Editing by Dhara Ranasinghe and David Hulmes