Will EMI Put Publishing On The Line?

A Financial Times report was the first indication that EMI may mortgage its publishing rights to raise more debt, following the announcement of the U.K. company’s interim figures for the year ended March 31st.

According to Official Charts Company numbers, the London-based major held on to a 16.1 percent share of all U.K. albums sold in the first quarter – disproving The Times’ prediction it would drop to 6 percent – compared to Vivendi Universal’s 32.8 percent, Sony BMG’s 16.1 percent and Warner Music’s 9.4 percent.

The logic behind the FT argument is that it could give the company more breathing space and cheaper debt while it completes its restructuring. However, the private equity groups said to be circling EMI for the last six months would hardly want to see key assets in the control of its lenders.

EMI may equally feel that deterring interest from the finance houses is a good move, in the same way as it flew in the face of Warner policy when it removed the DRM protection from its online product.

Further indication that company chief Eric Nicoli intends to turn the company around without selling to either Warner or private equity comes from the news that EMI has already appointed Deutsche Bank and the Royal Bank of Scotland to arrange a potential securitisation.

At the moment, the company is saving money far better than it’s earning as the recorded music revenues have dropped 15 percent to £174 million. The city had predicted a worse result than the one EMI had forecast in the second of two February profit warnings, although it’s in line with the second of them.

The city seemed relieved and the share price edged up 4.8 percent to 225.75p within hours of April 18th announcement of the interim figures.

The interim report concentrates more on the fact the cash cost of restructuring is now being put at no more than £125 million, rather than the £150 million previously announced. It’s expected to save £70 million per year as of the end of 2008.

The final audited 2007 figures are expected by the middle of May.