HMV mulls sale of Canadian arm

HMV Group PLC says it is considering strategic options for its Canadian retail music chain, including a possible sale of the company to pay down debt.

Based in Maidstone, England, the company said in a statement Friday the company is considering divesting its Canadian retail arm as well as Waterstone's, a British bookstore chain.

"There can be no certainty that any transaction will be concluded," the company said.

"The board also confirms that no discussions are taking place with respect to an offer for the group."

Reports suggest that Waterstone's founder, Tim Waterstone, and Russian billionaire Alexander Mamut are interested in the book chain. British firm Hilco, known for restructuring faltering retail chains, is also a rumoured buyer.

'I don't think it has great value, which is kind of a problem for HMV' Analyst Nick Bubb

Strugglingunder more than $200 million in debt, HMV Canada'sBritish parentis fighting for its life after revealing earlier this month that it would not meet all the conditions of its bank facility agreement which includes loans and overdraft deals when it reports its results for the year ending in April.

But the chain dismissed the notion that banks were calling in their loans to the company on Friday. "Banks continue to be supportive," the company said, adding they "maintain a regular and constructive dialogue with its lenders."

Investors cheered the news, sending the company's share price upnine per cent in London.

The chain was once the dominant seller of music in Canada, but ran into tough times as the industry moved online and conventional CD sales dropped.

"The HMV business in Canada used to be quite profitable. It used to make about six million pounds in profits, that's going back a couple of years. The sad fact is that it's not making any money now," said Nick Bubb, a retail analyst at Arden Partners in London.

In the summer of 2010, the company launched an online music-selling servicethat critics dismissed as being too little, too late.

"I don't think it has great value, which is kind of a problem for HMV," Bubb said.