EMI to be liquidated?

EMI logoLike everyone else on Wall Street, and particularly in the music industry EMI is facing pressure from it’s creditors, and the outlook is not improved by the rejection of a recent proposal from Terra Firma (EMI’s owners) to pump £1 billion into the company, in return for Citibank (the sole major creditor to EMI) writing off a proportion of the £2.6 billion of the debt owed to it. Presumably this means that without a similarly radical solution, EMI is going to be facing issues maintaining liquidity or meeting it’s covenants (the agreements which govern the amount of debt it’s allowed by it’s creditors to operate with).

EMI 2009 ebitdaEven the upturn in their revenues, while encouraging, only represents a small percentage, and we’re not yet privy to their yearly report, which they’re holding off until after their talks with CitiBank have reached a workable conclusion. Looking at last year’s operating losses of -$258 million and a total loss (including things like amortisation and depreciation of assets) of -$757 million, the company is looking another thumping loss in the face, without much prospect of a return to the black side of the line in the short term (take a look at pg 33 of this report for the scary numbers).

Of course, as Digital Music News points out – there are more radical solutions to be considered: “One option is to simply liquidate”

As previously advised, Terra Firma has been in discussions with EMI’s lender. Until these discussions have come to a conclusion, it is not appropriate to publish an Annual Review of Maltby Capital for the 2009 financial year.

As already announced, EMI Music (the recorded music division) delivered a strong operational turnaround with EBITDA increasing from £51 million to £163 million for the year ended 31 March 2009.

EMI Music Publishing, the leading publisher of popular music, continued to deliver strong performance with EBITDA increasing from £112 million to £135 million for the year ended 31 March 2009. (via the EMI website)

[I’m not sure I agree that this upswing qualifies as a turnaround, in the face of their yearly losses overall…] If one of the big 4 were to fold under market pressure, what would happen to the rest of the industry? Collapse of the mega-label structure would surely spell anarchy in the music industry as a whole, but anarchy is good for change…

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