All’s Well At EMI, Says Elio

Within a couple of months of Terra Firma having to pour £84 million into the company, EMI chief exec Elio Leoni-Sceti is reassuring staff that the overall financial situation is stable.

He reportedly sent an e-mail saying all’s well after the Wall Street Journal ran a piece on March’s Terra Firma bailout, apparently rekindling rumours that the company’s not trading well enough to keep the banks happy.

Leoni-Sceti says it’s not true that Terra Firma pumped the money in to avoid EMI breaching its loan covenants because the covenants allow for EMI’s parent company to top up earnings when they fall below the level required to sustain the debt.

“Normal corporate loans have covenants – if a company breaches them, the lender automatically takes control of the assets. Instead, under Terra Firma’s agreement with Citigroup, we have some financial ratios that we are tested on at certain dates,” he said.

“This means the debt carries with it flexibility in dealing with deviations from agreed-upon covenants,” he said, apparently explaining that a covenant isn’t really a covenant if a cash injection is enough to keep the lender’s hands off the assets.

“If those ratios are not met at the required times, our holding company Maltby injects small amounts of additional investment capital which are called ‘equity cures,’” he said, outlining how the deal gives EMI space to top up the pot when the going gets tough.

“Those equity cures were expected and are provided for. They come out of a fund that Terra Firma established for Maltby/EMI nearly two years ago in the full knowledge that as we transformed the business, there would be a need for some additional investment capital. In the last financial year, we were on budget with our equity cures,” Leoni-Sceti told EMI staff.

“Thanks to your skill and hard work, EMI Music is delivering strong growth in operating profits and cash flow, and we have maintained market share – despite being in a period of major reorganization,” he added.

He didn’t detail EMI’s current financial standing with Citigroup, although recent media reports suggest the company still has debts of about £2.7 billion ($ 4.43 billion).

Apparently unimpressed with the workings of EMI, singer Joss Stone is reportedly ready to forfeit £2 million in a desperate bid to leave the label.

She claims they have “no working relationship” and has even recorded a song called “Free Me” about her wish to escape, according to the Daily Mail.

EMI is said to be refusing to let her go and is taking legal action in return, claiming she is in breach of contract by failing to deliver the master tapes for her new album Colour Me Free.

The 22-year-old allegedly told EMI she wanted to leave in January and insiders told the Mail she is willing to give up £1.2 million from a £7.5 million advance she was given in 2006.