NY Post: WMG Positioning Itself To Buy EMI
May 21, 2009 at 5:51 AM (PT)
PETER LAURIA writes in TODAY's (5/21) NEW YORK POST that "Two years ago today, TERRA FIRMA bought EMI for $4.7 billion -- a price so wildly out of whack that since then WARNER MUSIC CEO EDGAR BRONFMAN JR. has been judiciously managing his label's balance sheet to move on EMI when it eventually collapses under the weight of its debt.
"That time is rapidly approaching.
"An EMI-WMG merger has always made sense, and with WMG's newly strengthened balance sheet and the lights dimming on EMI, the stage may finally be set for a merger," said PALI RESEARCH analyst RICHARD GREENFIELD in an interview yesterday.
"Though BRONFMAN rarely gets credit for his managerial skills, WMG's successful $1.1 billion bond offering YESTERDAY (NET NEWS 5/20), which allows the label to eliminate its entire $1.3 billion in bank debt, along with the company's $658 million cash hoard has him looking a lot smarter.
"[The offering] should remove any and all liquidity fears in the market, even before WMG begins to benefit from a stronger back-half fiscal 2009 release schedule," GREENFIELD wrote in a report.
Problems At Terra Firma
THE POST writes that "TERRA FIRMA is going to have to provide another cash infusion in AUGUST to avoid breaching debt covenants when MALTBY, the holding company that controls EMI, reports earnings.
"CITIGROUP, which controls EMI's $5 billion debt load, can push the label into bankruptcy if debt covenants are breached.
"WMG's bond offering removes all covenant obligations and extends its debt repayment schedule out to 2016. Its debt interest expense will grow, however. BRONFMAN's moves give WMG greater financial flexibility so it can be opportunistic regarding acquisitions. And the company appears to have such designs in mind as a clause in its debt offering allows the bonds to be redeemed before 2013 "if a major music transaction occurs."
"GREENFIELD took that to mean that WMG is positioning itself should a merger with EMI present itself."