HMV’s liquidation sale now unlikely as creditors opt to sell 100,000 records and DVDs by tender. The culprit? Hong Kong’s sky-high rents
- Creditors decide to sell to the highest bidder instead of holding a liquidation sale because the cost of renting a venue would eat into the profits
- Tender to be held in June to find a single buyer to take the whole stockpile of 100,000 CDs, DVDs, Blu-Rays, after HMV closed shop in Hong Kong
HMV’s much anticipated liquidation sale is unlikely to happen now after the troubled retailer’s creditors on Friday decided to opt for a tender sale to clear out roughly 100,000 CDs, DVD, Blu-Ray discs and other remaining stock.
They blamed Hong Kong’s famously high rents for the decision to call off what would have been the city’s largest liquidation sale in a decade. The plan now is to sell off the whole collection in one go to the highest bidder.
“The creditors worried that a liquidation sale might not be a good idea as the cost to rent a venue to conduct the sale may be very expensive,” said Wong Sun-keung, a partner at accounting firm Vision AS, who is handling the liquidation of HMV.
Wong had been negotiating with a landlord in Causeway Bay for a potential venue.
Hong Kong is known as the world’s most expensive city to rent property. Causeway Bay has overtaken New York’s Fifth Avenue to become the world’s most expensive retail space at US$2,671 per square foot per year, according to the annual Cushman & Wakefield survey of high-street retail rents.
“We would also need to hire people to handle the sale. The cost for the rent and wages would be high while the sale prices would probably be heavily discounted,” Wong said in a telephone interview after the creditors’ meeting.
As such, a seven-member committee representing the 340 creditors, decided to opt for a tender sale in June to find a buyer who is willing to buy the entire batch of CDs, DVD, Blu-Rays, Vinyl records and other items.
“We will sell all the remaining stocks in one go,” Wong said.
Shoppers turned away as HMV winds up 25-year-old Hong Kong retail chain
HMV’s vast array of unsold stock is being stored in two containers in Sun Tin and Yuen Long. These include about 20,000 CDs, 50,000 DVDs, 24,000 Blu-ray discs, 9,000 vinyl records, and several of HMV’s iconic dog statues.
Wong will advertise in some newspapers within next two weeks to invite companies or individuals to submit a bid with a proposed price for the stocks. The highest bidder would take the lot.
“Only if the tender offers were too low would we consider a liquidation sale. But now we prefer to use a tender to sell the remaining stock, because it’s simpler and we believe we can get a better price,” Wong said.
HMV’s creditors hope to recoup some of their combined HK$40 million in debt.
The final two potential buyers decided to walk away from the bankrupt music giant earlier in May after they found they could not legally use the HMV brand again in Hong Kong and mainland China.
HMV Digital China voluntarily wound up its retail unit, HMV, on December 18, caving under the pressure of the digital download era. The firm also has film production and artist management businesses that are not affected.
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Crushed by online music sales, the stores that had once attracted superstars such as Mariah Carey, Boyzone and Backstreet Boys to meet their fans had not been able to generate sufficient income to pay their rent and other expenses.
Although the remaining stock has a book value of HK$9 million, Wong believes it will be hard to recoup the full amount from the tender.
The last time a vast collection of music went up for sale was the bankruptcy of jailed former Chief Secretary Rafael Hui Si-yan. Hui, a music lover, had a collection of 11,000 vinyl records when he was declared bankrupt in 2013, owing about HK$75 million to five banks.
A collector in Asia bought all of Hui’s record in one go at an undisclosed price, according to Mat Ng, a partner of EY who was formerly managing director of JLA-Asia which handled Hui’s case.
“We created a website to let potential buyers select which records they wanted to buy. There were over 100 potential buyers who showed interest in buying some or all of the collection. Eventually, there was a single buyer, a collector in Asia, offering a reasonable price to buy the whole lot. The deal was done,” Ng said.
Ng agreed that rent would be an issue for a liquidation sale. The previous liquidation sale, handled by another EY partner in 2008 for the 62-year-old Tai Lin Radio Services, was held in the Tai Lin shops shortly after it went into provisional liquidation so it did not need to pay extra rent for the venue.
