* Reduced availability of insurance for some suppliers
* Company says has had no problems getting stock
* Shares drop 13 percent
(Adds analyst comment, background, updates shares)
By Mark Potter
LONDON, Jan 19 (Reuters) - Credit insurers have reduced the cover they are prepared to give to suppliers of HMV Group, adding to worries about the long-term future of the British music and books retailer and hammering its shares.
The withdrawal of credit insurance -- which insures suppliers who provide goods on credit to retailers -- was a major blow to failed retailers such as Woolworths and Zavvi as they tried unsuccessfully to stay in business during the recession.
HMV, which issued a profit warning earlier this month, said on Wednesday cover had not been withdrawn but it continued to have excellent relations with suppliers and had no difficulty in obtaining stock.
"Credit insurers are reviewing the level of cover they provide on the group," it said. "Whilst this has resulted in the reduction in the availability of credit insurance to certain of the company's suppliers, our business remains a core channel to market for them."
However, analysts said the restriction of credit insurance underscored the need for HMV to move quickly to secure its financial position.
The group's shares dropped as much as 13 percent to 22.75 pence. The stock was worth around 140p two years ago.
HMV, which has been battling for years with cut-price competition from grocers and the Internet, said earlier this month that meeting a test of its borrowing rules in April would be tight.
"There will be increased pressure on HMV to move quickly to secure its financial position, whether in terms of financing and its covenant requirements or other means in order to underpin supplier and investor confidence," analyst John Stevenson at brokerage Peel Hunt said.
HMV has already said it plans to close or sell 60 British stores over the next 12 months and make a further 10 million pounds of savings from across the group.
Some analysts think it may need to take further action such as closing many more stores or selling its Waterstone's books chain. (Editing by James Davey; Editing by David Holmes)