The Times reports that HMV, parent company of Waterstone's, could be forced to reduce its dividend instead of raising funds through a rights issue to offset its fixed costs as the high street retailer sails close to its bank covenants. In last week's strategy update, HMV said it was committed to maintaining its dividend despite the fact that earnings and free cash flow are below previous guidance. The company pledged to return dividend cover by two times within three years.

Goldman Sachs said in a note that it would not rule out the company raising equity to reduce its current gearing "so as not to breach the covenants with its banks". But the investment bank said that HMV's current dividend payouts are not sustainable, adding: "Dividends are likely to be cut."