Selling the bookstore chain is one option the retail group is considering in order to raise £75m in return for a relaxation of its lending covenants as it is set to breach certain terms of its bank loan.
Earlier this month HMV issued its second profit warning this year and expects to miss its target of £45m in full-year underlying pre-tax profits.
Other options HMV is thought to be considering to raise cash include further store closures and a share issue.
A possible sale of Waterstone’s has been long rumoured with founder Time Waterstone’s said to be a potential buyer.
Other potential bidders for Waterstone’s could include Russian investor Alexander Mamut, who has increased his stake in HMV Group to 6% in the past three months.
The group already plans to close 60 stores as it looks to “reshape” its business in the face of further falling sales and profits.
HMV declined to comment on speculation.