Coldplay's lable 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, The Guardian are reporting today. More discussion on this is at the Coldplay forum here onwards.
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".
Pictures of Coldplay at Estadio Universitario, Monterrey, Mexico (11th March 2010):
Photos by Galo González
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