U.K. entertainment retailer Zavvi has denied media reports that it has agreed to the appointment, by its creditors, of an emergency restructuring team from business advisory firm Ernst & Young.

However, a company statement confirmed that Ernst & Young is advising Zavvi. It follows serious supply problems with entertainment wholesale distributor EUK, which went into administration - roughly equivalent to Chapter 11 bankruptcy protection - on Nov. 27. Administrators confirmed today that a sale has not been possible and 700 of the 1,075 EUK staff have been made redundant.

"Contrary to speculation, Zavvi can confirm that its creditors have not appointed Ernst & Young, however Ernst & Young have been providing invaluable advice and expertise to the group over the past few weeks since Entertainment U.K. (Zavvi's main supplier) was placed in administration," said a statement.

The statement added that the retailer "would like to reassure customers that it is dealing direct with suppliers to ensure that the right product is available in its 125 stores for Christmas." Zavvi has struggled to fully stock its stores and was without key releases by Britney Spears and Take That on the Dec. 1 release date; sales are suspended on its Web site.

Management is currently reviewing its distribution strategy for the 125-store chain and will announce plans in the near future. The statement also expressed "disappointment" that the administrators had been unable to find a buyer for EUK.

A spokesman declined to comment on reports that Sir Richard Branson's Virgin Group had guaranteed Zavvi's up to 60 days' orders with EUK. Virgin Group backed the management buyout of its Virgin Megastore chain in September 2007.

The Times reported that Ernst & Young had been appointed by Zavvi's creditors and was standing by to take further measures in case Zavvi was unable to repay £106 million ($158 million) of debt to EUK.

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