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Terra Firma prepare way for future sale of EMI shares
By CMU Editorial | Published on Monday 5 July 2010
Investors in Terra Firma have approved a resolution which will allow the equity firm to raise up to £500 million by selling shares in Maltby Capital, the company through which it owns music major EMI.
As previously reported, when Terra Firma was desperately trying to raise the £120 million EMI needed to not default of its loan commitments earlier this year, some sort of share sale was considered as one route for generating cash. One option was to spin EMI’s recording and publishing divisions off into two separate companies, selling a big stake in the latter. Though with the recent appointment of EMI Publishing boss Roger Faxon to a new job overseeing the running of both recordings and publishing, it seems EMI is now making its two divisions more closely integrated, rather than preparing them to be split up.
Another option was to just sell shares in EMI to other companies or individuals. Really this would mean selling shares in investment vehicle Maltby Capital. Doing so would, of course, reduce the value of Terra Firma’s own stake in EMI, and the future return for the equity group’s financial backers. Though said backers have had to write off so much value on their portfolio of interests as a result of EMI’s woes, I don’t suppose that would make much difference.
In the end such a share sale wasn’t needed to keep the bailiffs from EMI’s door last month – Terra Firma’s existing investors came up with the cash – but it seems the paper work has been done to allow a future share sale should it be needed.
According to the Mail On Sunday, Terra Firma investors approved a resolution recently that would allow Maltby Capital to sell up to £500 million in shares at any point up to 2015. Said resolution has been added to the holding company’s files at Companies House. However, Terra Firma reps told the paper there were not immediate plans to instigate such a share sale, and that the resolution was simply a move to enable such a sale at some point in the future if it was required.
Insiders say EMI’s flagging recordings division should be OK finance-wise until next June following last month’s cash injection from Team Firma. Though that might depend, in part, of how big the previously reported hole in the EMI pension fund proves to be.
