HMV, the UK’S last major high-street music retailer, is expected to go into administration as early as Tuesday, putting 4,350 jobs at risk.
The 92-year-old store has seen its sales eroded by online music retailers and digital downloads, and has been attempting to manage £220m of bank debt.
It warned last month that its future was in “material uncertainty” and that it was likely to breach banking covenants at the end of January.
The company was due to issue a crucial Christmas trading update as early as this week.
The decision to call in administrators is understood to have been taken at a meeting late on Monday night.
Deloitte is expected to be appointed to handle the administration as early as Tuesday.
It is thought that HMV’s suppliers, which had thus far supported the company and provided financial help, may have turned down a request for further assistance.
Last week HMV began a massive sale in an attempt to boost revenues, sending its shares down more than a fifth on Friday.
Sources at the time claimed the promotion was “nothing to do” with the negotiations.
It had already raised cash by selling off book store Waterstones for £53m and the Hammersmith Apollo music venue for £32m.
It has also shifted its emphasis from the fast-declining CD and DVD market to new technology products.
Earlier on Monday sources told Reuters that private equity firm Apollo Global Management did not intend to take over HMV, despite having bought some of its debt.
The development at HMV is the latest blow to the high street which has seen the collapse of stores such as JJB Sports and Comet in recent months.
Camera retailer Jessops fell into administration last week.
At HMV’s interim results in December it revealed a 10.2pc fall in like-for-like sales and posted a total group loss of £36.1m.
HMV’s first store was opened in July 1921 by Edward Elgar.
On Monday its shares closed at 1.1p, down 8.3pc on the day, valuing it at just £4.7m.
HMV’s chief executive Trevor Moore, who previously led Jessops, took over in September from Simon Fox, who had spent six years at the helm.
At HMV Mr Moore instigated a series of reforms that he said were intended to improve in-store service.
But he warned in December: “While I can see many future opportunities it is clear to me that the current market conditions, and in particular the volatility in the group’s core music, visual and games markets, create uncertainty as to the level of trading results that can be achieved in the year ahead.”
Spokesmen for HMV and for Deloitte declined to comment.
HMV shares over the past 10 years