EMI Hoping For Strong Holiday Music Sales

Needs Sales To Meet Debt

Time may be running out for GUY HANDS, the British private-equity chief who bought EMI GROUP LTD. in one of the last big deals before the credit crunch, reports THE WALL STREET JOURNAL. EMI is entering a crucial phase. The music company needs to generate enough cash to satisfy its banker, CITIGROUP INC., by MARCH. And EMI needs strong sales over the holidays and early next year to revive its music division.

In a sign that the market increasingly thinks EMI could default on its loans, the price of insuring against a default by EMI is rising. It currently costs £931,000 to insure £10 million of EMI debt, up from £868,000 a month ago, according to data provider MARKIT.

That said, EMI's internal forecasts are that it will generate enough cash. EMI expects to generate £280 million in earnings before interest, tax, depreciation and amortization in the fiscal year ending MARCH 30th, a person familiar with the matter said. If it meets this target, TERRA FIRMA will likely avoid having to inject more cash into the business, the person said.

EMI could raise more money by selling assets. EMI executives contacted at least two other music companies several months ago to discuss the possible sale of EMI's classical and jazz labels, including the BLUE NOTE label, people familiar with the situation said. The discussions petered out after an EMI executive heading the negotiations was moved to another role, the people said.

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