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 Bankers at Citigroup Inc. (NYSE:C) may be humming the tune to "Run for Your Life" as they negotiate a restructuring of the debt load of Beatles' music label EMI Group Ltd. with private equity backer Terra Firma Capital Partners Ltd. Citi is reportedly taking a hard line on working out a deal that would provide some relief for EMI, which is groaning under the weight of the music industry's struggles and the £2.6 billion ($4.9 billion) of debt it took on from Citi in its £2.4 billion LBO in 2007, done at the height of the credit bubble. The U.K. buyout shop is currently working on a £200 million to £280 million high-yield bond issue for EMI, but that is only likely to come as part of an overall deal with Citi to dramatically reduce the debt load, according to The Deal Pipeline (subscription required). The timing of the EMI deal was terrible for both Terra Firma and Citi, as the implosion of the credit bubble in the summer of 2007 left Citi to syndicate the debt out, forcing it to hold all of the £2.6 billion in debt on its own books. At the time, Wall Street banks were forced to deal with over $400 billion in "hung LBO debt" that they were committed to providing for buyouts, but unable to syndicate out. In light of its current troubles, Citigroup has been playing hardball when its comes to refinancing. The NY Post reports: Citi has been trying to rid itself of troubled loans -- sometimes by forcing companies into bankruptcy -- in an apparent attempt to reduce the size of its balance sheet, according to people familiar with the bank's actions. These sources said the bank has put the brakes on attempts by some of its corporate debtors to restructure, pushed German designer Escada into insolvency and is moving in that direction with fashion house Valentino. ... A piece of the loan reportedly requires the music division's cash flow to rise relative to its debt. Since last September, however, EMI has failed to hit its required target three times, and Terra Firma has had to put more money in the business to keep it in compliance. Thus far Terra Firma's investors have approved a £300 million equity injection into EMI, but the sponsor is unlikely to be able to contribute anymore as it would require allocating more than 30% of the fund to a single investment. Terra Firma said in March that it had written down its investment in EMI by $1.8 billion. Still, EMI may have some salvation in the form of its crown jewel -- the Beatles discography. The recent re-release of the Fab 4's album's has given EMI's revenues a big shot in the arm, but whether it's big enough remains to be seen. If not, EMI can only hope that Vikram Pandit is a big Beatles fan. - George White
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From: JEFF GORDON,
If and when The Beatles make enough box sets of their CD's available the recession will be over. They sold 2.25 MILLION of the remastered CD's in the first 5 days and the box sets sold out within 5 MINUTES of stores opening on 9/9/2009 !!!
Posted on:
September 30, 2009 7:38 AM
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Only more reason not to limit the number of Beatles mono box sets. They need the money, and why make it a limited edtion?