Recourse for HMV Customers?

Without being an expert on the legalities, this is how we at StubbsGazette see it at the moment.

Administration is a process whereby creditors effectively have their rights to get paid suspended while the administration process carries on to its conclusion.

If the administration process is successful, creditors will be asked by the courts to approve the rescue plan and be “crammed down” (ie write down some of the liabilities) to make the business viable in some form – if the administration process is unsuccessful then creditors’ rights are resumed in the normal way, most likely via a liquidation process which in any event will probably yield no return.

Anyone who has bought a voucher is now a creditor of the company. Similarly, anyone who has goods they want to return as they are faulty also is a creditor (although they may have recourse for a replacement against the manufacturer).

Normally a successful administration means that creditors only get a certain number of pence in the pound and the rest of their debt is written off. So the same would apply to vouchers / returns.

The issue with HMV particular to Ireland is whether some successful rescue of the UK stores can be engineered but there seems to be little interest in the Irish stores.

They may even struggle to find an investor in the UK as it appears the issue is not a mountain of debt but rather the fact that the company is losing money at the operating level and with everything in their market going digital they are becoming increasingly irrelevant. It has also just beed anounced that DVD and video games rental firm Blockbuster UK has gone into administration, putting more than 4,000 jobs at risk.

One important piece of advice that we can offer consumers is that they should make sure they are included in the list of creditors with the Administrator / Examiner, so that they get to vote on any proposals that are put to creditors in the next few months.