Four offers to buy Fopp, the cut-price music chain, have been received by administrators to the failed high street retailer HMV, suggesting some ambitious competitors still believe there is a future in building a chain of niche music stores on the high street.
Despite the offers the future of Fopp, which has just nine stores, is likely to remain tied to that of its sister brand, HMV, since the failed group's largest creditor, Hilco, is believed to be close to announcing a deal that will see it cherry-pick Fopp stores and the best of HMV's 222 sites, releasing them from the insolvency process. Some unviable stores have been sold to the likes of the supermarket chain Morrisons, which intends to convert them into convenience outlets.
Filings by administrators at Companies House show Hilco, a specialist investor in distressed companies, acquired £110m of bank loans from Royal Bank of Scotland and other lenders days after HMV failed. Hilco is believed to have paid the banks much less than the face value of the debt, though the terms remain undisclosed.
Official filings make clear these secured borrowings are unlikely to be recovered in full. That means, should – as expected – it wish to rescue HMV, Hilco will in effect be paying any consideration to itself. Unsecured creditors will get nothing. Among the biggest losers from the insolvency is the Treasury. HMRC is owed £20.6m in unpaid VAT, Paye and national insurance. The amount does not suggest the previous HMV management had let obligations to the taxpayer fall seriously into arrears.
Fopp founder Gordon Montgomery, who runs Rise Music store in Bristol, said he was unsurprised at the level of interest in his former business. "It is a great brand. If you look at the blogs everyone says HMV lost its way, but there are a lot of people who love Fopp.
"If you are off the pitch [the main high street] in music towns like Edinburgh, Manchester, Cambridge, Nottingham, Glasgow, you have to make yourself a destination. Fopp has a great reputation for selling music, with more left-field catalogue than HMV."
Administrators declined to name those who had offered to acquire Fopp, but they are believed to include trade buyers and private equity firms.
