Friday, May 29, 2009

ANOTHER LBO ABOUT TO BLOW? EMI GETS BAILOUT

Is EMI Group about to become the latest LBO disaster? Super-leveraged buyouts are becoming super-toxic meltdowns in the current climate, and EMI is showing serious signs of distress. According to the Wall Street Journal, Terra Firma owner Guy Hands has injected another £28 million ($45 million) into the label group, just to keep the lights on. The injection, completed in March, was designed to pay off interest obligations to lender Citigroup, according to the report.

So, why keep this patient on life support? Since its acquisition in August of 2007, the label has required financial resuscitation and support, though recent cost-cutting efforts have helped the bottom line. Many of those chops were handled under CFO Chris Kennedy, who is now moving into another position.

Whether EMI Music can reemerge as a leaner, meaner machine remains a speculative bet, as do the underlying valuations of the company. All of that is leading to some speculation that spruced-up Warner Music Group could be pondering a buyout, part of a multi-year M&A dance between the companies.

SOURCE