Does Warner Music Have The Money To Buy EMI?

Could It Happen?

WARNER MUSIC, one of the rumored suitors for EMI, may not have the assets to make the deal, reports THE NEW YORK POST. The report says "Russian-born billionaire LEN BLAVATNIK is financing his $3.3 billion buyout of WARNER, including $2 billion of debt, by having the company borrow an additional $1 billion to pay shareholders. In a bid to attract investors, WARNER has added a provision to its new bonds that precludes it from making an acquisition of more than $1 billion in the event its debt-to-earnings ratio exceeds 4.6 to 1, according to analyst ANTHONY CANALE of COVENANT REVIEW, which analyzes credit agreements."

CANALE claims WARNER's debt-to-earnings ratio will exceed that loan convenant. "My initial conclusion is that means it cannot buy EMI," he told THE POST.

Last month (NET NEWS 6/21), the Board of Directors of EMI GROUP's holding company, EMI GROUP GLOBAL LTD, initiated a process "to explore and evaluate potential strategic alternatives," including a possible sale, recapitalization or initial public offering of the Company. EMI stressed that there is "no assurance that this strategic review process will result in a transaction."

ALL ACCESS also noted in JUNE that UNIVERSAL MUSIC GROUP would be one of the bidders for EMI GROUP. (NET NEWS 6/23). A person close to UMG passed that tip to the L.A. TIMES. Another name that surfaced in connection with EMI was billionaire ALEC GORES, chief of The GORES GROUP, which controls radio syndicator WESTWOOD ONE and CD/DVD/video game distributor ALLIANCE ENTERTAINMENT.

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