Hands May Need To Reach For Pockets

Guy Hands, the British private-equity chief who bought EMI Group, may need to fork out more money to keep the banks at bay, according to the Wall Street Journal.

The U.S. paper reckons EMI’s Christmas release schedule isn’t strong enough to bring in the money needed to make the requisite repayment to Citigroup Inc. in March.

EMI needs strong sales at the busiest and most competitive period of the year to revive a weak music division, although none of its biggest acts have albums in the pipeline.

The company, which Hands’ private equity firm Terra Firma bought for £2.4 billion in 2007, has denied suggestions that it needs more cash to avoid breaching covenants.

A source close to the private equity company categorically denied the rumours, and told the Independent that internal forecasts predict EMI will generate enough cash.

According to the annual report published Oct. 24, EMI lost £123 million in restructuring costs as 1,500 staffers lost their jobs.

It also took a £192 million write-down on the value of its assets and lost £125 million on new releases. Financial charges relating to currency movements totaled £250 million.

The poor results were accompanied by a “no holds barred” review of the year written by EMI chairman Lord Birt, a former BBC director-general, who says the company “cannot be turned around overnight.”

Half the losses were due to restructuring and a revaluation of the balance, but even the £164 million underlying trading profit the company made was wiped by the £165 million it paid to cover loans and interest.

WSJ expects it will be another close call.