HMV shares hit by credit insurance fears

Shares in HMV Group fell as much as 7% after the music and book retailer confirmed some of its suppliers have had levels of credit insurance cut.

However, HMV said it had experienced "no difficulty" in obtaining stock.

A big UK manufacturer of CDs and DVDs told BBC business editor Robert Peston on Tuesday its sales to HMV were now effectively uninsured.

Earlier this month, HMV said profits would be at the low end of forecasts after disappointing Christmas sales.

On Wednesday the shares fell sharply, before ending the day 2.8% down at 25.5p.

Tough market

"Credit insurers are reviewing the level of cover they provide on the group," HMV said in a statement.

"Whilst this has resulted in the reduction in the availability of credit insurance to certain of the company's suppliers, our business remains a core channel to market for them."

Suppliers take out credit insurance to cover payments owed to them by customers.

So when insurance companies lower their credit limits, they are concerned about the ability of the supplier's customers, in this case HMV, to pay their debts.

The insurance companies would not explain the reasons they were concerned about HMV.

Earlier this month, the group, which also owns Waterstone's bookshops, said it was closing 60 shops this year as a result of falling sales.

The firm also said it was struggling to avoid breaching the terms of a bank loan.

The group has faced fierce competition from online retailers such as Amazon and iTunes, and has seen its share price fall almost 75% since June last year.

Related Internet links

The BBC is not responsible for the content of external Internet sites