HMV has thrown in the towel after years of struggling to fend off nimbler rivals by calling in administrators in a move which puts more than 4,000 jobs in jeopardy.
As Sky News revealed exclusively earlier on Monday evening, the board of HMV has served notice of its intention to appoint Deloitte to oversee last-ditch efforts to rescue the high street entertainment retailer.
Following a board meeting that lasted several hours, HMV directors, led by the chairman, Philip Rowley, and chief executive Trevor Moore, decided the business could no longer trade without insolvency protection.
HMV had been in talks with its lenders until last week about a new financing package, the terms of which could not be agreed, according to insiders.
The company said on Monday:
"On 13 December 2012, the Company announced that as a result of current market trading conditions, the Company faced material uncertainties and that it was probable that the Group would not comply with its banking covenants at the end of January 2013. The Company also stated that it was in discussions with its banks.
"Since that date, the Company has continued the discussions with its banks and other key stakeholders to remedy the imminent covenant breach. However, the Board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection, and in the circumstances therefore intends to file notice to appoint administrators to the Company and certain of its subsidiaries with immediate effect. The Directors of the Company understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business."
Trading in HMV's shares, which are now expected to be worthless, will be suspended on Tuesday morning.
The appointment of Deloitte follows the accountancy firm's work on the collapse of Woolworths in 2008.
HMV has been caught between the encroachment onto its turf of supermarket chains such as Tesco (Other OTC: TSCDY - news) and Asda, and the explosive growth of digital specialists like Amazon which are unencumbered by hefty real estate costs.
Chuka Umunna, the shadow business secretary, said the news of HMV's potential demise was "deeply worrying":
"HMV is a national institution that has been a feature of our high streets for over 90 years, so this news is deeply worrying. For the sake of HMV’s employees, we hope a way can be found to keep the business going – the demise of this national institution would be a sad loss to British retail."
HMV traces its roots back to 1921, when Sir Edward Elgar, the renowned composer and conductor, opened its first store on London's Oxford Street.
Retail insiders said Deloitte is likely to be "inundated" with offers for parts of HMV's business, including its brand, but said it was unlikely that any buyer would emerge for the whole business.