The Mail on Sunday
Takeover looms for EMI if plea for £120m fails
PLAN TO LEASE BACK CATALOGUE FALLS THROUGH
EMI investors are reluctant to agree to any demand from the music giant for more cash to fend off its lender Citigroup after the collapse of its plans to lease its back catalogue to rivals.
The group, owned by financier Guy Hands’ investment firm Terra Firma, must come up with a strategic plan for its future by the end of the month to persuade investors to put in an additional £120 million.
Citigroup can take control of the company if it fails to make the payment. EMI is understood to have failed a test on its banking covenants last week, which means it has until mid-June to make additional payments to the bank or face losing control of the company.
It failed to persuade music rivals Universal and Sony to pay about £200 million for the right to sell EMI’s back catalogue, including music by The Beatles and Blondie, under licence in the US and South America.
EMI’s recorded music chairman, Charles Allen, was hoping a deal could be done in time to meet the test on the company’s banking covenants and so avoid tapping investors for more cash.
While Universal and Sony may return to the table, investors have said they are reluctant to put more money into EMI in a move some see as unlikely to provide a long-term solution to its problems, though EMI sources deny this. The company reported a £1.7 billion loss in the year to March last year.
‘They haven’t asked us for more cash yet, but at the moment we are minded to request they seek alternative opportunities,’ said an institutional investor.
A number of key investors in EMI are US public-sector workers’ pension funds, including the New York firefighters, policemen and teachers, who face seeing their investment wiped out if Citigroup seizes control.
Terra Firma acquired EMI in 2007 for £4.2 billion, which included a £2.6 billion loan from Citigroup. Hands has since admitted it is now worth just £2.2 billion.
The figure emerged in documents filed as part of his court case against Citigroup, which Hands accuses of misleading him into making an offer for EMI. Citigroup denies this.