WMG/EMI—Here Comes The Bride, again??

What do Clear Channel and Terra Firma have in common? They both purchased assets that have declined greatly in value and as a result are struggling to satisfy debt loads that are difficult to support given the current business climate.

Terra Firma, which purchased EMI two years ago for $4.7 billion is under stress to help the music company meet some of its covenant debt obligations. If EMI is unable to meet those obligations, then Citigroup, which controls the $5 billion debt load could move EMI into bankruptcy.

On the other hand, Warner Music Group CEO Edgar Bronfman has just successfully managed to restructure his company’s debt through a very smoothly and successfully orchestrated bond offering which raised $1.1 billion thereby putting WMG in a more flexible position with regard to acquisitions.

According to the New York Post, this important change in WMG’s balance sheet could mean that a merger with EMI, a long talked about marriage—yet to be consumated, might actually have stronger than ever odds of success. “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,” Pali Research analyst Richard Greenfield commented yesterday (5/21).

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David M. Ross has been covering Nashville's music industry for over 25 years. [email protected]

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