Terra Firma injects $14.8 mil into EMI
Equity firm tries to prevent Citigroup loan defaultLONDON -- Terra Firma recently has put about 10 million pounds ($14.8 million) into EMI to prevent the major label group from defaulting on its 2.7 billion pound ($4 billion) Citigroup loan, according to the Wall Street Journal.
The report says Terra Firma might have to inject further cash into EMI in March to avoid a default because the major does not have a big run of fourth-quarter releases to bring in revenue. But Coldplay, Katy Perry and the latest "Now" release continue to perform well, and the major's 2009 schedule includes new albums by Lily Allen, LaFee, Keith Urban, Pet Shop Boys, J. Holiday, the Red Jumpsuit Apparatus, Depeche Mode, Beastie Boys and Massive Attack.
Terra Firma raised 250 million pounds ($371 million) last year for contingencies, which would be used if an injection of funds is necessary, sources told the WSJ. The private-equity firm paid 2.4 billion pounds ($3.56 billion) for EMI in May 2007.
The market view would appear an EMI loan default has become more likely: It now costs 931,000 pounds ($1.38 million) to insure 10 million pounds ($14.84 million) of EMI debt, up from 868,000 pounds ($1.29 million) a month ago, according to data provider Markit.
But EMI's internal forecasts state the major will have enough cash: EMI expects to generate 280 million pounds ($416 million) in earnings before interest, tax, depreciation and amortization during the fiscal year ending March 31, a source told the paper.
Asked about the challenges in meeting its financial covenant with Citigroup, EMI Music CEO Elio Leoni-Sceti said last month: "You will not hear me saying this 100% -- I think it would be silly for any company. But I tell you, I'm very comfortable with meeting the covenant."
A source said EMI has turned an operating loss into an operating profit for the six-month period to the end of September. EMI Publishing continues to perform better than the recorded music business, increasing earnings for the year ending March 31 compared to 2007.
EMI's share of album sales fell to 9.2% in the U.S. during the first three quarters of 2008, from 9.7% a year earlier, according to Nielsen SoundScan.
EMI has had recent global successes including Italy's Tiziano Ferro, who debuted at No. 1 with his album "Alla Mia Eta" (Capitol) in October, and Herbert Groenemeyer's best-of album "Was Muss Muss" (Capitol), which debuted this month atop the German and Austrian charts.
Also, Capitol Records Nashville's Darius Rucker debuted at No. 1 on Top Country Albums and No. 5 on the Billboard 200 in September.
Terra Firma and EMI declined comment.