Administration
In December 2008, The Daily Telegraph reported that Zavvi was seeking help from the Virgin Group to guarantee millions of pounds worth of its stock payments to Woolworths' Entertainment UK (EUK) as EUK had entered into administration.[15] The Times reported that Ernst & Young might step in if Zavvi could not pay EUK the value of the stock which amounted to a £106 million debt.[16] Zavvi was forced to shut down its online operations as it entered into talks with EUK and Deloitte & Touche, EUK's administrators.[17] A spokesman for Virgin said that a deal had been done with the administrator of Woolworths, which accepted £40 million to settle the debt.[5] On 8 December 2008, Zavvi suspended its sale of gift cards citing the problems with its supplier, EUK, as the cause.[18]
On 24 December 2008, the Zavvi UK group went into administration owing to the loss of its supplier as the company was unable to source stock.[19][20] Zavvi had attempted to buy supplies from alternative suppliers but experienced difficulties in obtaining favourable credit terms or acceptable prices. This placed pressure on the company's working capital and when quarterly rents of approximately £13 million were due on 25 December 2008, the directors were unable to meet their creditor liabilities.[21]
Ernst & Young LLP was appointed administrator, and Zavvi continued to trade while a buyer was sought. Zavvi Guernsey was liquidated, but Zavvi Ireland was not at the time subject to any formal insolvency proceedings. At the time of administration, Zavvi had 114 stores in the UK and 11 in Ireland, employing 2,363 permanent staff and 1,052 temporary staff.[22] All stores opened as normal on Boxing Day / Saint Stephen's Day, 26 December, for the normal post-Christmas sale.[23] Zavvi Ireland entered liquidation in January 2009.[24] On 13 January, Zavvi Entertainment Group Limited entered administration.
In January 2009, HMV revealed that it had acquired five stores in Ireland and nine in the United Kingdom, saving 269 jobs.[25] The purchase price for the nine UK stores was approximately £630,000.[26] Head Entertainment, a company created by former managing director Simon Douglas and his business partner Les Whitfield, purchased five stores.[27] A total of 222 employees together with the remaining Zavvi stock were transferred to Head, and the total purchase cost was £111,000.[28]
In February 2009, the final Zavvi stores were closed.[2] Following the closure, That's Entertainment bought some former units.[29]
