Citigroup notified of EMI debt cure plan
LONDON (Reuters) - Buy-out house Terra Firma will inject new money into struggling UK music business EMI, preventing it from falling into the hands of its lender Citigroup, EMI said on Friday.
Terra Firma had until Friday to inform Citigroup, which holds over 3 billion pounds of EMI debt, that it would inject some 105 million pounds to keep control of the business it acquired in 2007 for another year.
The 4 billion pound ($5.83 billion) acquisition by Guy Hands's private equity firm has come to show the perils of deals done at the peak of the credit bubble with a high debt burden and a volatile performance crippling the business.
EMI said in an emailed statement that its parent company Maltby Investments had received confirmation from Terra Firma it would be injecting new capital into the business.
Citigroup has also been informed of the plans, EMI said, confirming an earlier report from Reuters that Citigroup had received the so-called "compliance certificate," a letter notifying of plans to inject new equity.
"We are very pleased to have received this confirmation of an additional investment," said recently appointed EMI executive chairman Charles Allen.
Terra Firma does not need to provide any evidence of the money being available, and has until June 14 before it has to pay up.
Since it became clear the business had breached covenants at the end of March, Terra Firma has been tapping its investors for cash to get EMI back within the terms of its debt.
Existing investors will provide all the 105 million pounds, one of the sources said, meaning Terra Firma does not need to approach third parties for additional funding.
In common with much of the recorded music industry, EMI has been hit hard by mass illegal downloading and a move away from album sales to single digital tracks.
Allen's arrival at the group coincided with a new plan to turn around the fortunes of the ailing music group, which is home to acts including Kylie Minogue and Robbie Williams.
EMI has seen some improvement, particularly in the United States -- traditionally one of its weakest markets -- from sales of the Beatles and country music act Lady Antebellum.
Hands had been hoping to raise 360 million pounds to see EMI through any other covenant tests until 2015. Terra Firma plans to go back to investors for the remaining 255 million pounds, a separate source previously said.
Citigroup and Terra Firma declined to comment.
(Editing by David Jones)
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