QVC Group stakeholders are assessing how the bankruptcy process could address a growing deferred tax liability at the TV shopping networks’ holding company, said two sources familiar with the matter.

Advisors for creditors and the company are actively discussing implications of the tax liability, particularly the concern that as the obligation grows it will erode value for creditors, said one of the sources.

“The tax asset does not outweigh the tax liability that’s growing, so it would make sense to file the holdco,” according to the first source, who added that advisors are still working to understand the full implications of the tax liability.

The tax issues stem from QVC Group’s deferred tax liabilities tied to exchangeable debentures held by Liberty Interactive, a holding company that sits between the listed parent and operating business QVC Inc., according to the company’s 10-K filed in February.

The debentures tax liability stood at USD 1.14bn as of the end of 2024, a USD 83m increase from the year prior. Net deferred tax liabilities across all of QVC were USD 1.3bn after factoring in additional deferred tax assets and liabilities.

Under a tax sharing agreement between the parties, QVC Inc. is obligated to pay the holdco’s tax bills. However, QVC Inc.’s ability to upstream funds to the holdco has deteriorated as its business declines.

QVC reported weak 3Q25 results, with revenue dropping 6% to USD 2.21bn and adjusted OIBDA falling 32% YoY to USD 169m, driven by declines in linear TV viewership and volatile consumer confidence, according to the company. Free cash flow for QVC Inc was negative for the first nine months of 2025 after factoring in payments for TV distribution rights along with capex.

The holdco’s deferred tax liability arises from timing differences between book and tax accounting, according to the tax consultant. While the figure represents an accounting mismatch, rather than immediate cash owed to the government, it becomes a real obligation over time under the tax sharing agreement, creating what the tax consultant described as “a ticking time bomb” for the operating business.

“At some point, you have to pay these taxes, and I believe that’s the genesis for filing,” said a buysider. “You don’t want those to come out of your box and extract value and screw with leverage.”

Filing the holdco in bankruptcy would “crystallize” the deferred tax liability at its current estimated value, preventing further deterioration of the estate’s value, the tax consultant said.

In bankruptcy, tax sharing agreements typically can be terminated, and obligations under them become general unsecured claims that rank behind secured debt. This treatment also creates strategic incentives for filing, according to the consultant.

“If I were QVC, and Liberty was considering filing, I’d want to file as well. That way, the payables under the tax sharing agreement become general unsecured claims,” the consultant said. “If Liberty files alone, they’ll try to enforce payment. But if both file, those obligations could be wiped out.”

One potential restructuring scenario would involve a prepackaged bankruptcy with holdco receiving a payment from QVC Inc. in exchange for releasing the tax sharing agreement and retaining cash on hand at the holdco level, said the second source.

Another option would be for QVC to put off a full restructuring by simply reaching a deal with lenders to extend the maturity of QVC Inc’s revolver past October 2026 through a drop-down transaction, added the second source.

QVC fully drew down on its USD 3.25bn revolving credit facility this year, leaving it with consolidated net leverage under its revolving credit facility at 4.2x, narrowly above the 4.5x covenant threshold. The revolver was last quoted 60.125/63.625, according to MarketAxess.

The revolver currently sits pari passu to over USD 2bn in senior secured notes at QVC Inc. Holdco has more than USD 1.5bn in convertible and unsecured debentures, a complicated capital structure owing to the company’s roots as a subsidiary of Liberty Media.

QVC Inc.’s USD 605m 6.875% senior secured notes due 2029 have tumbled this year, last exchanged hands at 43 on 8 December, according to MarketAxess. The holdco USD 505m 8.25% senior unsecured debentures due 2030 traded earlier this month at 5.93.

The company is working with Evercore as financial advisor and Kirkland & Ellis as legal counsel, Debtwire previously reported. A group of creditors at the operating company has engaged Davis Polk and PJT. Creditors at holdco Liberty Interactive have engaged Akin and Centerview. JPMorgan, agent on the revolver, has hired Lazard.

A representative for QVC didn’t return a request for comment.

Photo: QVC