EMI Passes Loan Test

EMI is believed to have passed the year-end loan test with its bankers, largely thanks to sales of its digitally remastered albums from The Beatles and new albums from Katy Perry and Lily Allen.

The cash-strapped music company owned by Guy Hands’ private equity firm Terra Firma has to prove it’s sufficiently profitable to service the £2.5 billion loan it has through Citigroup.

Both sides were at each other’s throats in the lead up to Christmas as Hands, apparently believing his bankers were trying to foreclose on the loan and hive off EMI to US giant Warner Music, decided to sue them £1.5 billion for allegedly giving him misleading advice during the auction for the UK music major.

Hands accused Citigroup of making him think there was another bidder interested in buying EMI before he paid more than £4 billion for it in 2007.

Citigroup denies the claims and says it will defend itself vigorously.

The Daily Mail says EMI’s music publishing arm is understood to have passed the year-end loan test with ease, while the recorded music side scraped through on the back of good last-quarter sales by a handful of its major artists.

EMI’s next payment on the loan to Citigroup is due in March. Last year the interest on the loan was £196 million, roughly two-thirds of company profits.