Warner Music loss widens, drops dividend

By Franklin Paul

NEW YORK (Reuters) - Warner Music Group (WMG.N: Quote, Profile, Research, Stock Buzz) posted a wider-than-expected quarterly net loss on Thursday and said it would stop paying quarterly dividends to conserve cash for reducing debt and developing artists.

The dividend suspension, which helped send Warner Music's stock down 22 percent, raised questions about the company's ability to manage its debt.

On a conference call, analysts peppered Warner executives with questions about the company's debt pile which stood at $2 billion at the end of the quarter. It has a cash balance of $249 million.

"We are not concerned about our ability to meet our debt covenants," Chief Executive Edgar Bronfman said.

"We decided to suspend the dividend in order to take a conservative approach to cash management. (The move) allows us to reduce the net debt and maintaining level of A&R investment. That's the best combination to create equity appreciation for shareholders," he added.

A&R stands for "artists and repertoire" and refers to record companies' talent scouting and development.

The world's third largest music company, home to recording artists such as R.E.M. and Led Zeppelin, posted a fiscal second quarter net loss of $37 million or 25 cents a share, compared with a loss of $27 million or 19 cents a year ago.

Warner Music, which has struggled with declining CD sales as consumer switch to new forms of digital music, said its loss from continuing operations was 23 cents a share. That was well short of analysts estimate of a loss of 12 cents a share, according to Reuters Estimates.