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It’s make or break week for EMI
By CMU Editorial | Published on Monday 10 May 2010
So, this is the week when Terra Firma and its top man Guy Hands must convince EMI’s bankers Citigroup that the music major will be able to pay £120 million in loan fees (actually, different reports have the fees anywhere between £100 million and £120 million) at the start of next month. As EMI has no money, that means its owners Terra Firma must lend them the cash.
As previously reported, that means Hands needs to persuade some of his financial backers to hand over another £120 million, and then convince 75% of his investors to allow him to continue to bail out the music firm. The former seems to be more or less assured already, but some are speculating that Hands winning the support of three quarters of his backers is not a foregone conclusion, even though Terra Firma insiders say they are quietly confident their top man will get the support he needs for his big plan to keep hold of the music company. But it seems certain at least a handful of Terra Firma investors reckon now is the time to cut their losses on the EMI experiment, which has already resulting in the value of the equity group’s overall portfolio being slashed.
US media have reported that if Hands can’t demonstrate to Citigroup this week how the £120 million in fees will be paid next month then the bank will foreclose on their loan and prepare to put the major up for sale as soon as the middle of next month.
With that in mind, it was reported this weekend that Warner Music has stepped up its talks with that other music-obsessed equity group KKR about mounting a joint bid. As previously reported, there has been speculation Warner and KKR would bid together to buy EMI, with the former taking the London major’s recordings catalogue and the latter it’s more lucrative music publishing business. Whether KKR would look to merge that with BMG Rights Management, in which it has a 50% stake, is unclear.
Meanwhile, Sony Music top man has also indicated that, should EMI be up for sale, he too would look into making a bid. Rolf Schmidt-Holtz has been quoted – possibly out of context – as saying: “We are in a position that allows us to seize every opportunity in the market – including EMI”.
