EMI hit by £250m pensions gap

 

GUY HANDS must defuse a £250m pensions timebomb at EMI this summer on top of finding £120m to prevent the music group falling into the hands of its lender, Citigroup.

 

The financier will be ordered to plug the gap in EMI’s pension deficit when the Pensions Regulator finally rules in June on a long-running row with the trustees of the scheme.

 

The intervention promises to pile more financial pressure on Terra Firma, Hands’s investment firm. It will begin a charm offensive on backers later this month to persuade them to pour more money into the home of bands such as Coldplay and The Beatles.

 

Maltby Capital, EMI’s parent, estimated in its last accounts that the pension deficit stood anywhere between £10m and £200m. An analysis carried out for The Sunday Times by Lane Clark & Peacock, the actuary, suggests the deficit has since ballooned to £250m. Because trustees have doubts over the strength of EMI’s finances, LC&P believes they could demand far more.

 

The issue has been unresolved since Terra Firma acquired EMI for £4 billion in 2007. Last summer, it ousted the chairman of the trustees as relations soured. The regulator’s determinations panel is forced to adjudicate in only a handful of instances. EMI believes that at worst it will be asked for £200m, potentially over the next 10 years. Its payment is likely to be sliced from post-tax profits, denting investor returns.

 

Meanwhile, Charles Allen, the chairman of EMI’s recorded music arm, is putting the finishing touches to a five-year business plan that he will present to Terra Firma and Citi in the next two weeks. He will tell backers that EMI can drive earnings 25% higher in five years, to a minimum of £400m by 2015.

 

Terra Firma needs to win approval from 75% of investors to draw down fresh funds by June 14. On that date, Citi could take control of the business as EMI will have breached the terms of its £3.3 billion loan.

 

http://business.timesonline.co.uk

Maltby Capital, EMI’s parent, estimated in its last accounts that the pension deficit stood anywhere between £10m and £200m. An analysis carried out for The Sunday Times by Lane Clark & Peacock, the actuary, suggests the deficit has since ballooned to £250m. Because trustees have doubts over the strength of EMI’s finances, LC&P believes they could demand far more.

 

Pension Actuaries! :awesome: Yay!

I knew you'd be impressed!!

 

More jobs go in EMI shake-up

 

HUNDREDS more staff face the axe at EMI as managers prepare to present a five-year plan to investors to persuade them to pour more money into the troubled music group.

 

Charles Allen, chairman of EMI Music, is this week expected to lay out his vision to Guy Hands, the financier whose Terra Firma investment vehicle owns the music group, home to Coldplay and the Beatles back catalogue.

 

Allen is expected to say that profits at EMI Music could be close to £300m by 2015 in the best case, against less than £200m for the year to March 2010. To get there, the former ITV chief executive will need to wield the axe again, as well as make a fresh attempt to lease EMI’s American music catalogue to rival record groups.

 

Analysts said he could slice up to another £100m from EMI Music’s £500m cost base. Since it was acquired by Terra Firma in 2007, the recorded music arm has suffered £200m in cost cuts, resulting in the loss of 2,000 jobs.

 

Terra Firma needs approval from 75% of investors to draw down £120m in fresh funds by June 14 or risk its lender, Citigroup, seizing control of EMI. Most of the backers’ initial £1.8 billion investment has been wiped out.

 

Citi will this week be handed the music group’s trading figures for the last quarter so that it can calculate how much cash Terra Firma must stump up to “cure” a breach in the terms of its £3.3 billion loan agreement.

 

Hands thinks he can raise enough cash from investors to give EMI two years of breathing space. At the same time, he is suing Citi for allegedly misleading him over the sale of EMI.

 

Including the contribution of its publishing arm, EMI believes it can push its profits as high as £550m by 2015, although a group target of £400m is thought to be more realistic.

 

EMI’s performance is in part down to the state of the global music market, where sales have dropped 30% in the past five years, with digital income failing to offset falling CD sales. KKR and Warner Music are plotting a break-up bid for EMI if it falls into Citi’s hands this summer.

 

EMI is faring better in the US charts with three albums in the top five, including the country act Lady Antebellum.

 

http://business.timesonline.co.uk

this is getting boring..

^ I second that

All at sea: Katy Perry is signed to beleagured record label EMI

 

EMI pulls back over a sell-off

 

EMI Music chairman Charles Allen is believed to have pulled back from suggesting sales of parts of the group in the strategic plan he has just submitted to financier Guy Hands, who runs parent company Terra Firma.

 

Allen is understood to be keen to renew attempts to strike a sales and distribution pact with rivals for the company's business in the Americas.

The last attempt at such a deal, set to raise about £200m, failed.

 

Any future attempt would see it keep control of output and prices while letting rivals handle sales, said EMI sources. EMI, which is home to Coldplay, Lily Allen and Katy Perry, made a pre-tax loss of £1.75bn in the year to March 2009, but an operating profit of £293m on revenue of £1.58bn.

 

Read more: http://www.thisismoney.co.uk/

 

Hands seeks £360m to keep EMI on track

 

Terra Firma boss calls on investors to secure music giant's future

 

EMI is struggling to persuade its investors to stump up £360m to secure its future until 2015 amid scepticism about what the future holds for the music industry, which has been hit hard by illegal downloading and a collapse in CD sales.

 

Industry insiders say that investors are divided over whether to back an audacious attempt by Guy Hands, boss of EMI's owner Terra Firma, to drum up financing to plug a £120m shortfall against loan covenants agreed with primary lender Citigroup by mid-June.

 

Hands is asking for an additional £240m to tide EMI over for a further five years even though the company lost £1.8bn last year. It owes Citigroup £3.2bn after the highly leveraged buyout of the music company by Hands in 2007. He paid £4.5bn in total.

 

A music analyst said: "Investors are being asked to make a leap of faith as they have already written down the value of their EMI holding to virtually zero." If Hands fails to raise cash, he risks one of his most high-profile investments being seized by Citigroup.

 

But sources say Terra Firma, a private equity house, has lined up outside interests to furnish extra equity if investors – mostly US and Canadian pension funds – baulk at the idea.

 

However, EMI has run up against a bearish report for the industry from PricewaterhouseCoopers. It says: "The recorded music market will contract at a 4.4% compound annual rate to $7.2bn in 2013 from $9bn in 2008."

 

Hands hopes that investors will be encouraged by a new business plan by Charles Allen, executive chairman of EMI's recorded music division. Allen is looking at the possibility of asset sales, with some analysts speculating it could offload its Japanese business for £200m, or sell parts of its back catalogue of jazz and classical music.

 

Allen is also looking at a deal that could see Warner Music brought in to distribute EMI music in the US. Warner would pay an upfront payment of between £150m and £200m.

 

EMI was dealt another blow last week when Sir Paul McCartney quit the label, giving the publishing rights to all his solo and Wings hits to the Concord Music group. McCartney complained that he was treated like "part of the furniture".

 

http://www.guardian.co.uk

 

Guy Hands' Terra Firma has agreed to cut the amount of money it will ask investors for to plug the funding gap in its debt-laden music group EMI.

 

The private equity firm, which has been at war with EMI's lending bank Citigroup, will request a minimum £105m upfront and delay a further £255m cash call until the end of the year.

 

This week Terra Firma sent out its long-awaited restructuring proposal for EMI ahead of a scheduled investor vote in mid-May. Plans include a radical cost-cutting drive at the group, whose stable of artists includes Cold Play and Katy Perry, as well as an increased effort to sell the company's sales and distribution arms in the US and elsewhere.

 

Mr Hands was thought to need £120m by June to stop Citigroup, which bankrolled all of EMI's £3.2bn debt – from wrestling control of the company for a breach on its loan agreement. He had initially wanted investors to inject a greater amount – some £360m – to provide more breathing space on future debt issues for five years, as well cover for EMI's pension scheme.

 

However, early feedback from investors - who have seen their original stakes written down by 90pc since EMI was bought on the eve of the credit crunch - meant that those plans had to be overhauled.

 

Terra Firma needs 75pc approval from investors to inject new equity and would be unlikely to receive that level of support for the full amount in this time frame.

 

Recent improvement in EMI's trading has meant that Terra Firma needs £15m less than originally thought to ensure covenants are not breached. Terra Firma and Mr Hands' own contribution will be less than £50m of the total, meaning that only single millions will be put up by the group in the initial fund-raising round.

 

http://www.telegraph.co.uk/

Guy Hands has only a fortnight to save EMI

 

GUY HANDS has 12 days to persuade investors to stump up fresh funds for EMI or risk losing control of the troubled music group, home to top acts such as Coldplay and Katy Perry.

 

A handful of the largest backers of Terra Firma, Hands's investment vehicle, have given verbal commitments to contribute £105m - enough to plug the latest breach of its borrowing agreement with Citigroup.

 

But Hands still needs to secure the support of 75% of his fund's 200 investors by May 14 for the money to be drawn down. That is the date Terra Firma must submit a "compliance certificate" to Citi showing EMI can meet the terms of its £3.2billion loan.

 

If Terra Firma fails to win enough backing, it will tap outside investors for fresh investment. However, it is unlikely to have enough time to do so by a week on Friday, giving Citi a chance to seize control. The cash needs to reach Citi by June 11.

 

Hands was forced to scrap plans to raise £360m in one go because of time pressures. He calculated that this sum would have covered top-up interest payments until 2015, when the loan is due to be renegotiated.

 

Instead, he has targeted £105m, enough to cover March's loan breach and carry EMI through to next spring. The figure is less than initially thought because the music group's trading was better than expected in the final months of the year.

 

The plan is to approach investors again for £255m later. As soon as it has secured some breathing space, EMI is expected once again to attempt disposals. Analysts believe its Christian music label, based in Nashville, Tennessee, will be offloaded. Plans to license its American music catalogue will also be revived.

 

Terra Firma's annual review reveals that another €256m (£223m) has been written off from the value of EMI, confirming that the Pounds 1.8billion investors pledged in the 2007 buyout is all but worthless. Hands made a series of presentations to investors last week based on a revised five-year plan for EMI drawn up in part by Charles Allen, executive chairman of the recorded music arm.

 

http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article7114017.ece

Hands Projects 58% Return to Win Backers for EMI

 

Guy Hands’s Terra Firma Capital Partners Ltd. is telling investors they could earn a rate of return of as much as 58 percent if they provide cash needed to keep lenders from seizing control of EMI Group Ltd.

 

The projection includes any recovery of the original equity, which would probably be worthless without the new investment, according to a presentation Terra Firma sent its clients April 27. The firm needs to corral support from 75 percent of fund investors and inform Citigroup Inc., EMI’s lender, by May 14, according to the document.

 

Terra Firma asked current and third-party investors for 360 million pounds ($546 million) in two parts, to restructure EMI’s 3.2 billion pounds in loans and bring the company into compliance with its debt agreements. While EMI, whose artists include Coldplay, Queen and Pink Floyd, produces sufficient cash flow to service its obligations, it hasn’t lowered the debt enough to keep the company from breaching an agreement with lenders, according to the presentation.

 

“Investors really don’t like these deals because it is just asking them to put in some more money so they lose a bit less,” said Jérémie Le Febvre, partner at global placement agent Triago in Paris, which helps firms raise money. Private equity firms are restructuring loans in companies acquired at the peak of the buyout boom, to cut debt and extend maturities after a record rally in credit markets. Blackstone Group LP’s Hilton Worldwide hotel chain last month completed a deal to reduce debt by almost $4 billion and extend the maturity by two years.

 

Intrawest ULC, the owner of Olympic skiing resort Whistler Blackcomb that’s backed by Fortress Investment Group LLC, refinanced a loan that was due in December, after lenders threatened to auction off the resort during the Olympic games. The new loan matures in 2014, Intrawest said in a statement April 27, without giving details. The equity returns projected for EMI assume a successful exit of the fund’s investment by 2015.

 

Terra Firma has cut the fair value of its 2.6 billion-euro ($3.4 billion) EMI investment to zero, according to a February letter the firm’s 5.4 billion-euro fund, TFCP III, sent to investors. The fund, which put 59 percent of 2.8 billion euros it invested into EMI, owns 63 percent of the company. A separate fund, TFCP II, owns 23 percent. In addition to EMI, Terra Firma is also negotiating with creditors over TFCP III’s second-largest investment, 691 million euros in aircraft leasing company AWAS, according to the letter. The fund’s stake is now marked at 466.2 million euros. The company, with earnings before interest, tax, depreciation and amortization of $652.2 million, has about $378 million in debt maturing this year that needs to be refinanced, according to the letter.

 

EMI has earnings before interest, taxes, depreciation and amortization of 330 million pounds in the fiscal year 2010, according to Terra Firma. The company may sell its Japanese division and its EMI Christian Music Group, the document shows. Terra Firma is seeking an initial 105 million pounds from investors to help EMI meet debt covenants through March 2011, according to the presentation. The private equity firm is also seeking guidance from investors whether they would be willing to invest an additional 255 million pounds to ensure EMI stays compliant through 2015, when its loans end. Terra Firma said it would be willing to contribute 55 million pounds.

 

EMI was unable to get money from other major music companies through a combination of licensing and outsourcing transactions, although talks are continuing, according to the presentation. “The majors indicated that no deal would be possible unless an equity cure for a longer period was achieved, given the perceived risks associated with the debt holder subsequently becoming the owner of the company,” Terra Firma said.

 

http://www.businessweek.com

Okay so... if WE invest in it, does that mean WE will also get up to a 58% return also? I would say I smell a "free lunch", but a free lunch isn't always a tasty lunch.

 

Of course "up to" 58% includes 0%, and also negative returns. :dozey:

They're hoping you'll overlook that.

 

Queen quits and EMI won’t stop them now

 

They once wanted to break free — and now they have: the veteran rock band Queen have quit the beleaguered music label EMI for its rival Universal.

 

Queen, who have been with the heavily indebted British label for almost 40 years, are believed to have been lured to Universal with a new contract worth tens of millions of pounds.

 

The band’s exit follows the departure of Sir Paul McCartney, who took his solo and Wings back catalogue to Concord Music this year.

 

There have been concerns that the financial turmoil at EMI, whose private equity owner Terra Firma is trying to raise at least £105 million to save the company from bankruptcy, could prompt an artist exodus. Music industry insiders have suggested that Pink Floyd could also quit the label.

 

However, people familiar with the situation said yesterday that Queen had moved to Universal primarily for the money. “EMI just decided they couldn’t compete. It was too much to pay and they want to spend that money on developing new talent,” one music industry insider said.

 

Another person close to the deal said that Queen, whose Greatest Hits has sold 5.4 million copies, making it the UK’s highest-selling album, would not move to Universal immediately. The band, whose former lead singer Freddie Mercury died in 1991, are expected to see out their contract, which expires at the end of this year.

 

The move comes as the Terra Firma boss Guy Hands tries to tempt the private equity fund’s investors to back a bailout of the music group, which it took private in 2007 for £4.2 billion. It is understood the investors have already been briefed about Queen’s departure and the move has been factored into a turnaround plan drawn up by EMI executive chairman Charles Allen.

 

Mr Hands has told Terra Firma’s investors they could make a profit up to 58 per cent if they invested an extra £360 million in the company. In a presentation sent to investors last week, he said that the “upside case” for saving EMI from its lender Citigroup with a bailout of that size is that, if the company were to be sold before 2015, investors would pocket £208 million, thus recovering all their equity investment.

 

The presentation also shows that Mr Hands has backed down from earlier plans to present a wholesale £360 million bailout as the only option for investors. Terra Firma had argued that a payout that big was the best way to ensure a turnaround at EMI because it would protect the company from Citigroup until 2015.Mr Hands is now asking investors for £105 million now, plus £255 million later. The music giant needs to find £105 million by next Friday to avoid a covenant breach and will fall into the hands of Citigroup unless investors stump up that money. People close to the situation said yesterday that Terra Firma has had verbal commitments from its investors that they will put in the £105 million.

 

Queen are essentially a catalogue act, although Brian May and Roger Taylor — two of the band members — still perform live, albeit infrequently.

 

http://business.timesonline.co.uk

 

EMI KEPT FROM CITIGROUP GRASP

 

FINANCIER Guy Hands has moved closer to preventing music group EMI falling into the hands of Citigroup.

 

He is said to have secured backing from investors in his private equity firm Terra Firma to pump an additional £105million into the firm.

 

That would prevent EMI breaching the terms of £3.2billion of loans made by Citigroup when Terra Firma bought the recording and music publishing business in 2007.

 

Hands needs the support of 75 per cent of investors and must tell Citigroup that he has found the funds by Friday.

 

Failure would see Citigroup take control of EMI, home to long-standing artists including The Beatles and Coldplay as well as newer acts such as Lily Allen and Gorillaz, b y June 14.

 

If Hands secures the £105million he will go bac k to investors for a furthe r £255million over the next few months to cover loans due in 2015.

 

Last year he launched a legal action against Citigroup, claiming he was misled over the sale, an allegation the Americans deny.

 

http://www.express.co.uk

 

EMI owner agrees to top up funds to block Citigroup

 

EMI's owner has raised new funds that should stop the US bank, Citigroup, from taking control.

 

Terra Firma, run by the billionaire financier, Guy Hands, has promised to inject more money into the business. The sum, thought to be more than £100m ($145m), means the company will keep within the terms of its loan agreement with Citigroup. If it had not raised the funds, Citigroup would have become the owners of EMI.

 

The giant bank holds £3.2bn ($4.7bn) of EMI's debt. Terra Firma's Maltby Investments bought EMI, whose acts include Gorillaz, Coldplay, Kylie Minogue and Robbie Williams, at the peak of the last boom in 2007, paying £4bn ($5.9bn).

 

Guy Hands has admitted he regrets paying so much for the company. In common with much of the recorded music industry, EMI has been hit hard by illegal downloads and falling album sales. EMI's executive chairman, the former ITV boss, Charles Allen, said: "We are very pleased to have received this confirmation of an additional investment."

 

Guy Hands had been hoping to raise £360m ($532m), which would have seen EMI financially stable through to 2015.

 

http://news.bbc.co.uk/1/hi/business/10117680.stm

Coldplay and Kylie, two acts that EMI has so far managed to hang on to.

 

Hands buys more time at EMI

 

The financier has found another £105m to keep the music group going, but there's no sign of a long-term strategy yet

 

So, private equity financier Guy Hands has persuaded investors to stump up another £105m to prevent Citigroup taking control of music group EMI, which is in debt to the US bank to the tune of £3.2bn. But the cash does nothing, other than kick the major problems facing the label behind acts such as Kylie Minogue and Coldplay a year down the road.

 

It is certainly a long way short of the £360m he had at first hoped to find. It will buy him breathing space only until March next year, and so far we have no clue whether the new capital came from existing investors – there are about 200 in Hands's Terra Firma outfit – or if outsiders had to be brought in. Later this year the financier must start scratching around for another £255m to buy time until 2014.

 

Now there are other problems to be addressed – not least how new EMI boss Charles Allen hopes to turn around the ailing recorded music division at a time when selling CDs is difficult, because his strategy is so far unclear. He may sell the US distribution rights or sell off the classical or jazz back catalogues.

 

Allen, whose tenure at ITV was dismal, has a record as a cost-cutter, but no obvious skill in digital strategy – he masterminded the ludicrous purchase of Friends Reunited and was a key figure in the disaster that was ONdigital – or in dealing with the creative talent that is so important in businesses such as TV and music. Several big names have departed since Hands's arrival: the Rolling Stones, Paul McCartney and his back catalogue, and this week Queen have decided the show must go on elsewhere too. Another departure has been Chris Briggs, the A&R man who was the link between EMI and Robbie Williams, who partly blamed the Hands regime for his decision to quit.

 

EMI's future is probably now dependent on the outcome of a court case in New York which will rule on whether Citigroup tricked Hands into overpaying for the company back in 2007. That is a brave bet for any investor.

 

http://www.guardian.co.uk

If Kylie's new album bombs that will be another nail in the coffin

The first single has been received well, not that that says alot. The album could still be shit.

Isn't it something stupid like 6 weeks until it gets a digital release the new single?

 

How many sales will they lose from fans whom gets a radio rip instead of the proper single just to listen to over and over.

Yeah, it's like July or something. Ridiculously long time before it gets released.

What they should do is have a digital release of the new single pretty much straight away after the first-play to take up the initial demand from super-fans, then have the physical release plus a proper digital release a couple months later.

EMI's promotional dept is working overtime - didn't even know Kylie had released a new single!

It's not been released :P

 

Only to radio and to youtube:

[ame=http://www.youtube.com/watch?v=ekPRAeHc-L4]YouTube- Kylie Minogue - All The Lovers[/ame]

Not impressed, doesn't seem like a stong first single.