Yesterday I asked if EMI was in deep financial trouble. Now it appears they may have found a way back from the brink. John Studzinski, a senior managing director at Blackstone Group is advising EMI owners Terra Firma on a plan to issue high-yield bonds to repay the $4.2 billion Citibank loan used to buy the music group. EMI is struggling under the weight of these loans and a receptive high-yield bond market could prove an attractive escape.
According the Financial Times and Wall Street Journal, JPMorgan and Morgan Stanley are in talks with Terra Firma, which bought EMI at the height of the bubble in 2007, about underwriting the bond issue. Just last month the Warner Music Group successfully oversold a similar bond offering at 9.5%.
Part of any deal must include a write-down of the loan by Citi, who have thus far been reluctant to take the loss despite rumors of near-insolvency and pressure from the US government to shed toxic assets. Unanswered is also if a struggling EMI would be able to service such a huge debt at 9.5%.
