EMI Asks For $500M Bail Out

I predicted back in January that one thing to watch for in 2009 would be Guy Hands to pawn off EMI to the highest bidder, with Warner as a strong contender. You would think with a roster touting artists like Daft Punk, Beastie Boys, Coldplay, Lily Allen, and more, that EMI parent company Terra Firma would be swimming in more gold than Scrooge McDuck. Rumors have them puppy guarding a gold mine of unreleased Michael Jackson songs as well. In spite of all the stellar product, EMI finds itself in for £2.5B to creditors.

Before Terra Firma gives EMI nearly a $500M shot in the arm, it has sent CEO Guy Hands to ask Citigroup for a Bail Out. Hands has asked Citigroup to write off close to 500M pounds of the label’s debt.

In a long career of successful investing, Hands will count EMI as the worst deal he ever made. Hands has now sunk more than £2.2B into a company on financial life support, including £1.7B for the original deal, £500m in additional capital, and £170m on restructuring and desperate attempts to turn EMI around.

Enter WMG’s head, Edgar Bronfman. He has been public about his desire to merge WMG and EMI for quite a while, and if Citigroup denies the erasure of debt to Terra Firma, Bronfman may just have his wish of cutting the “big four” down to the “big three” record labels.

Bronfman has strategically set up housekeeping in London, where EMI is based, under the guise of culturing his kids and giving them a broader world view. If you believe that, I think he’s got a bridge and some water for sale in New York too;  you might want to call your realtor about picking it up. WMG has just come out of a restructuring of their own debt, and maybe in a place to pick up EMI should the timing and price be right.

Technically, Terra Firma has until 2015 to bounce back and pay their debt back to Citigroup. Should Citigroup deny the bail out, I don’t see how they can continue to hold onto the bleeding investment that EMI has become.

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This entry was posted on Monday, July 13th, 2009 at 11:23 am. It is filed under wax and tagged with , , , , , . You can follow any responses to this entry through the RSS 2.0 feed.