emi logoSince 1st August 2007, when Terra Firma bought EMI for $8,000,000,000 with a 90% approval from it’s shareholders, the bottom line on EMI’s financial reports is set to show losses of more than $1.5 billion dollars, despite Terra Firma and its allies pumping in half a billion dollars worth of equity. EMI managed to meet the covenants imposed on it’s debt by Citibank in January, but is highly unlikely to do so in the coming quarter-year reports without further funding from Terra and Co.

EMI’s earnings are equal to paying the interest on their loans ($215 million!),  but if they can’t improve their financials they’ll be in danger of defaulting on their debt and having the company fall back into the hands of the lenders, Citibank. Of course, there is still Terra Firma’s lawsuit against Citi in the offing, claiming malfeasance on Citi’s behalf in handling the auction of EMI – One can imagine a lot of white knuckles and short words as the cheque for the interest payments is signed.

If the debt does turn bad, it seems likely that Citi would break EMI up for parts, the gem being the still-profitable publishing department. Such a move would drastically change the face of the mainstream music industry, particularly in the UK, where most of EMI’s artists are based. A lot of the big sellers would go to the other major labels, but the felling of one of the biggest trees in the wood would make a lot more room for independent labels to grow up from under.