Struggling entertainment retailer HMV has sold its 121-store Canadian unit to Hilco UK, raising £2 million (€2.25 million) to cut debt and help the firm stay in business.

The move by the 90-year-old firm to sell the Canadian business comes days after HMV's shareholders backed the £53 million disposal of its Waterstone's book chain to Russian billionaire Alexander Mamut.

Earlier this month HMV, which has issued four profit warnings this year, secured its immediate future with a £220 million refinancing deal that will effectively involve the British taxpayer taking a stake in the group.

"The board has fully explored the options available to it for HMV Canada, and believes that a sale to Hilco is the correct decision for the business at this time, whilst reducing the operating leverage in the continuing group," said chief executive Simon Fox.

"The group is focusing on clear and tightly defined plans for transforming HMV into a broad-based entertainment business."

Shares in HMV, which have lost 84 per cent of their value over the last year, closed on Friday at 9.45 pence, valuing the business at £40 million.