HMV not accepting gift vouchers as retailer faces going into administration

Thousands of people could be left with worthless gift vouchers now that music retailer HMV has officially applied to go into administration.

The retailer, which opened its first shop in 1921, suspended shares trading yesterday after unsuccesful talks with banks and creditors. Although HMV shops are still open for business, it is currently refusing to accept gift vouchers or make any refunds.

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In a statement, HMV's administrators, Deloitte, said it intended "to continue to trade while they seek a purchaser for the business".

However people are being urged not to throw away vouchers or receipts because, if HMV survives its period in administration, it may accept vouchers again.

Deloitte could also decide to begin accepting gift vouchers at any time. This can happen, as has been shown when Game went into administration.

But when Zavvi went bust in 2008, people with vouchers or gift cards were urged to register an unsecured claim. The administrators said they expected customers to get a full refund but, in these circumstances, the customer often doesn't.

HMV has had a long history with its roots stretching back to the 1890s. Its logo of Nipper the dog sitting by a wind-up gramophone listening to His Master's Voice became known around the world.

But the retailer has been struggling since 2007 and has revamped its business model a number of times, offering downloads, hardware, books and even setting up a social networking site Get Closer in 2008. The site closed only a year later.

But although major record producers and record labels, such as Universal, backed the company, HMV said yesterday that it had had unsuccessful talks with banks and stakeholders to avert an imminent breach of its debts.

This means currently those customers needing a refund or who want to use gift vouchers are left in limbo, as the retailer has to refuse to honour these debts.

Mark Little, principal analyst at Ovum said the announcement was "sad" but could provide digital downloads with a boost.

"With an estimated 38 per cent share of physical music sales in the UK, HMV's slip into administration is sure to create significant drag for recorded music sales as a whole in 2013, if Deloittes can't keep 249 stores trading.

"But this sad news could actually drive growth in digital music, which Ovum expects to hit £450 million this year, as consumers consider digital music channels instead as well as new services such as Amazon's Autorip, which offers a physical CD with a free digital download, in a bundle with strings attached naturally."