Terra Firma chief Guy Hands has raised the £105 million needed to bail out EMI and remove the threat of immediate closure by its U.S. bankers.
The beleaguered record company was expected to inform Citi it has the money and is able to meet its bank covenants by the May 17 deadline.
At press time it wasn’t clear whether the funds would come entirely from existing Terra Firma investors or from other sources.
The Times of London says the delay in raising the money was a result of some Terra Firma investors needing to put the cash call to a formal vote at their own institutions.
Hands asked 200 investors to provide the cash after the music company breached its loan covenants in March. He needed to secure the cash infusion by the deadline to prevent Citigroup from seizing control in June.
The deal is expected to buy Hands enough time to turn the record company around and raise the further £255 million needed to help EMI to meet its covenants up to March 2015, when the £2.6 billion load can be re-negotiated.
The last-ditch financing of the UK’s only surviving major music company comes as Queen, one of EMI’s top acts for almost 40 years, prepares to defect to arch-rival Universal Music. Paul McCartney, Radiohead and The Rolling Stones have already jumped ship.
Raising the money was crucial, as Terra Firma has soured relations with Citi by suing it for allegedly misleading it over the sale of EMI in 2007.
Terra Firma financed its £4.2 billion leveraged buyout of EMI in 2007 with £2.6 billion of debt. It has since struggled to combat teenagers’ appetite for file-sharing websites.
While the company is making enough cash to service its reimbursement obligations, it hasn’t done enough to reduce its debt to Citigroup.