Investors Rejig Structure Of HMV Media Group

The original structure for the GBP800 million (ecu 1.19 billion) HMV Media deal (EVCJ April/May 1998, page 27) was slightly adjusted following a delay in the planned high-yield issue.

However, press reports that the senior banks, Merrill Lynch & Co and SBC Warburg Dillon Read, cancelled the original GBP500 million syndicated loan after encountering low interest from other banks, were inaccurate, as are suggestions that the structure provides an example of a highly-geared buyout coming unstuck, according to Scott Lanphere of Advent International.

He explained that the planned GBP210 million high-yield issue, intended to pay back HMV Media’s bridge loan from EMI was delayed to avoid clashing with similar issues on behalf of Tower Records and Music Land.

During the hiatus, the investors underwrote GBP50 million in PIK (payment-in-kind) prefs in place of the zero-coupon note originally envisaged. Although the PIK instrument is effectively a high-yield note, it technically ranks as equity and thus gave HMV Media a higher rating. The GBP210 million high-yield issue has subsequently proceeded as planned, and senior debt and a GBP100 million revolving credit facility constitute the balance of the funding.